Annual Report • Mar 18, 2021
Annual Report
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| Year in brief | 1 |
|---|---|
| About Sandvik | 2 |
| Letter from the CEO | 4 |
| Our strategy | 6 |
| Targets and target fulfillment | 8 |
| Sustainability Goals 2030 | 10 |
| Trends and driving forces | 12 |
| UN Sustainable Development Goals | 13 |
| Sandvik Mining and Rock Technology | 14 |
|---|---|
| Sandvik Manufacturing and | |
| Machining Solutions | 20 |
| Sandvik Materials Technology | 26 |
| Our share | 32 |
| Summary, Group total | 36 |
|---|---|
| Development in business areas | 41 |
| Corporate governance report | 43 |
| Board of Directors | 50 |
| Group Executive Management | 52 |
| Risk management | 54 |
| Sustainability governance | 58 |
| Consolidated financial statements | 61 |
| Consolidated financial notes | 66 |
| Financial statements, Parent Company | 103 |
| Financial notes, Parent Company | 108 |
| Board statement on dividend proposal | 123 |
| Proposed appropriation of profits | 124 |
| Auditors' report | 125 |
| Non-financial notes | 129 |
| Assurance report | 141 |
| Annual General Meeting | 142 |
| Definitions | 142 |
| Financial key figures | 144 |
Cover photo: Interior from the Sandvik site in Troy, MI, US.
The formal Annual Report comprises pages 36–124. The Statutory Sustainability Report and Sustainable Business Report include pages 2–3, 9–11, 54–60 and 129–140. Unless otherwise stated, financial data on pages 0–7, 14–35 and 41–42 refers to continuing operations.
Sandvik is included in several prestigious sustainability indices and is a signatory of the UN Global Compact (UNGC).
| Key ratios, continuing operations | 2019 | 2020 |
|---|---|---|
| Order intake, MSEK | 104,075 | 86,287 |
| Revenues, MSEK | 103,238 | 86,404 |
| Operating profit, MSEK | 13,386 | 11,216 |
| Operating margin, % | 13.0 | 13.0 |
| Adjusted operating profit, MSEK1) | 19,219 | 14,563 |
| Adjusted operating margin, %1) | 18.6 | 16.9 |
| Free operating cash flow, MSEK | 17,745 | 16,425 |
| Return on capital employed, % | 15.2 | 13.3 |
| Earnings per share, SEK | 6.97 | 6.99 |
| Adjusted Earnings per share, SEK1) | 11.12 | 8.64 |
| Net debt/equity ratio | 0.18 | 0.04 |
| Lost Time Injur y Frequency Rate, LTIFR²) | 1.5 | 1.4 |
| Total Recordable Injur y Frequency Rate, TRIFR³) | 3.8 | 3.2 |
| Number of employees 4) | 40,235 | 37,125 |
| Share of women, % | 19.6 | 19.6 |
1) Adjusted for items affecting comparability, see page 42. 2) Injuries resulting in lost time per million hours worked. 3) Total number of recordable injuries per million hours worked.
4) Full-time equivalent.
Revenues and order intake, MSEK
A leading supplier in equipment and tools, service and technical solutions for the mining industry and rock excavation within the construction industry.
39% SHARE OF REVENUES 46% SHARE OF ADJUSTED OPERATING PROFIT
A market-leading manufacturer of tools and tooling systems for advanced metal cutting, expanding into digital and additive manufacturing.
38% SHARE OF REVENUES 41% SHARE OF ADJUSTED OPERATING PROFIT
A leading developer and manufacturer of advanced stainless steels, powderbased alloys and special alloys for the most demanding industries.
16% SHARE OF REVENUES 7% SHARE OF ADJUSTED OPERATING PROFIT
1)As of January 2021, Sandvik Mining and Rock Technology was divided into two separate business areas, Sandvik Mining and Rock Solutions and Sandvik Rock Processing Solutions.
A leading supplier of equipment, service and technical solutions for processing rock and minerals in the mining and construction industries.
2) In October 2020 the business area changed its name to Sandvik Manufacturing and Machining Solutions. Two business area segments were created: Sandvik Manufacturing Solutions and Sandvik Machining Solutions, as of January 1, 2021.
Strip
Stationary Crushing and Screening
The remaining -1 percent of adjusted operating profit refers to Other operations (page 42). Revenues and adjusted operating profit are excluding Group activities and operating profit is adjusted for items affecting comparability.
Sandvik is a global, high-tech engineering Group with approximately 37,000 employees and sales in more than 160 countries. We have a strong focus on enhancing customer productivity, profitability and sustainability.
We deliver drill rigs, rock-drilling tools and systems, mobile and stationary crushers, load and haul machines, tunneling equipment, continuous mining and mechanical cutting equipment, as well as service and various solutions to increase automation, safety and customer productivity.
Our tools and tooling systems for metal cutting as well as advanced materials and components are used in engineering industries worldwide, improving productivity, profitability, quality and safety as well as reducing environmental impact. We are also a global leader in high-alloy metal powder.
23%
Our tools and tooling systems for turning, milling and drilling in metals increase productivity when manufacturing, for example, engines and transmissions. Our stainless and high-alloy products are found in air conditioning and air bags, among other things.
We offer solutions for all forms of energy production, including clean and renewable energy. We supply high-alloy products, such as stainless steel tubes for selected niches in the most demanding industries as well as tools and tooling systems to satisfy the industry's metal-cutting needs.
We offer products and services that increase safety and customer productivity in breaking, drilling, crushing and screening within the construction industry. Application areas include tunneling, quarrying, civil engineering, demolition and recycling.
We work closely with the world's aerospace companies. As they apply new materials to manufacture airplanes that are lighter, safer and more fuel efficient, advanced tooling solutions and lightweight materials are critical.
The remaining 3 percent include mainly consumer goods, electronics and chemicals. ■ Sandvik Mining and Rock Technology ■ Sandvik Manufacturing and Machining Solutions ■ Sandvik Materials Technology
2020 was a year of special circumstances as a pandemic with far-reaching consequences impacted the entire world. At the same time we made several strategic decisions that will strengthen and shape the future of Sandvik. We stand strong and are ready to shift towards growth.
I took office as President and CEO of Sandvik on February 1, 2020. Shortly thereafter, it became clear that the pandemic the whole world was facing would also impose stringent demands on Sandvik – as an employer, as a partner to our customers, and as a member of the communities where we operate. We acted swiftly and decisively to secure our employees' workplaces so we could continue to serve our customers despite the challenging circumstances. Our employees also took numerous impressive initiatives to assist with equipment and other aid in local communities during the most critical phase of the pandemic.
At the same time, we had to take the measures necessary to ensure that Sandvik remains competitive over the long term, with a strong performance regardless of the market situation. In 2019, we were already adapting to a weaker business cycle, and in the spring of 2020 we initiated further actions to counter the effects of the pandemic that included activities both temporary and structural in nature.
One of our financial targets is to have an adjusted EBIT margin, rolling 12 months, of at least 16 percent. We delivered on this, even during this turbulent period. I see this as clear proof that Sandvik today is a far more flexible company, with greater resilience, than in the past. We could implement these adaptations so rapidly due to our decentralized business model, in which decisions are largely taken among our various divisions, which are close to the market and our customers.
Sandvik is ambitious in terms of sustainability. During the year, we continued to work intensely in order to achieve our long-term goals for 2030. For us as an engineering company with a strong base in research and development, sustainability is a major business opportunity. When we develop more efficient, safer and more environmentally sound solutions, we take an important step alongside our partners towards a more sustainable future. Our focus on sustainability also increases our attractiveness among current and future employees.
Sandvik continues to support the principles of the UN Global Compact and to contribute towards fulfilling the UN's Sustainable Development Goals.
During the year, Sandvik's Board of Directors made the decision to continue preparations for the distribution of the Sandvik Materials Technology business area to our shareholders. The Board's intent is to propose the distribution and listing of Sandvik Materials Technology on Nasdaq Stockholm at a shareholders' meeting in 2022, provided that the circumstances at the time are deemed to be right.
I am convinced that this is the correct way forward, both for Sandvik Materials Technology and for Sandvik as a whole.
In our other business areas, organizational changes were initiated in 2020 to drive further growth in our various operations. We see potential for growth through an increased degree of digitalization, automation and electrification, as well as through an active acquisitions agenda. In December, we signed an agreement to acquire the underground safety company DSI Underground, one of the biggest acquisitions in the history of Sandvik.
An example of how we are advancing our positions and expanding our offering with digital solutions is the acquisition of the software company CGTech, which will help our customers become even more efficient in their manufacturing chains. We have also chosen to relinquish or reduce our ownership in operations where we believe that others would be better owners.
Our financial position is very strong. We have continued to generate a healthy cash flow, and at year-end we had a financial net cash position. This provides us with greater resilience if market conditions deteriorate, and it provides us with the conditions for pursuing value-creating growth.
In many ways, 2020 has been a challenging year, but I am convinced that at the same time it has made Sandvik even stronger and more flexible. I would like to extend my warmest thanks to our employees for their fantastic efforts under conditions that at times have been difficult, and to our shareholders and customers for their continued confidence. We are standing on stable ground. Now we must make use of all the interesting growth opportunities we see before us.
Stockholm, March 2021 Stefan Widing, President and CEO
During 2020, Sandvik updated its strategy for an increased focus on growth. In recent years we have divested underperforming businesses, decentralized the organization and become a much more resilient company. From this stable platform we will further increase the focus on growth, digitalization, sustainability and agility. In 2021, we introduced six strategic objectives, defining achievements up until 2025. We are continuing with the financial targets set in 2019.
We have set a growth target of at least 5 percent (CAGR) through a business cycle. We need to increase our acquisition pace and we will add products and technology as well as services and digital solutions to our existing offerings. This growth target means that we aim to become a SEK 115 billion company by 2025. We will also focus on improving our New Sales Ratio (sales of new products).
Our objective is to be a leader in digital solutions in our industry and we will grow our digital customer offering. Internally, we will ensure efficiency through a seamless flow, supported by standardized business systems across our sites.
We have long-term 2030 sustainability goals in the areas of climate, circularity, people and fair play. All business areas and divisions have plans and actions to deliver on the goals and we will transparently report on the progress. By 2025, we should be halfway to reaching the targets.
Across the organization we want to advance the way we measure and improve customer value and customer satisfaction. By 2025, our divisions will be able to track their customer satisfaction improvements through structured methods and show continuous measurable progress.
Our financial targets include a trough EBIT margin, adjusted for items affecting comparability and metal prices, of 16 percent on a rolling twelve-month basis. In our different industries, our cost structure should be flexible enough to manage economic downturns. Well-prepared contingency planning will enable quick responses to changing market conditions. Continuous improvements on fixed costs and operational efficiency are other key factors.
We aim to be the employer of choice within our industries and attract the top talents. We will ensure a diverse workforce with regards to factors such as age, gender, nationality and ways of thinking. 25 percent of our managers will be women by 2025.
Customer Focus, Innovation, Fair Play and Passion to Win are our core values. Our core values represent the culture of the company and they guide us in our actions and daily business decisions. Customer Focus: We constantly strive to exceed our customers' expectations and enable them to excel in their business. We are decentralized and decisions are taken close to customers. Innovation: We always strive for technology leadership and successful
partnerships. We work to ensure everyday advancements and innovative shifts. Fair Play: We put health and safety first. We are ethical and compliant and conduct our business sustainably. Passion to Win: We establish our market leadership through strong performance management, continuous improvements and empowered people. We are passionate about making our company number one.
Sandvik has long-term financial targets focusing on growth, profitability, dividend and a strong financial position. The 2030 sustainability targets focus on the areas of circularity, climate, people and ethics.
GROWTH1) TROUGH EBIT MARGIN
≥5%
Target: A growth of ≥ 5 percent through a business cycle (here defined as 2016–2020), organically and through acquisitions.
Target: A trough EBIT margin of ≥16 percent rolling 12 months, adjusted for items affecting com-
parabililty and metal prices.
≥16%
DIVIDEND1) PAYOUT RATIO
50%
Target: A dividend payout ratio of 50 percent of earnings per share, adjusted for items affecting comparabililty, through a business cycle.
<0.5
Target: A net debt/equity ratio below 0.5.
Outcome: The revenue growth 2016–2020 was 0 percent. In 2020 the organic growth was -11 percent, due to a slowdown related to the Covid-19 pandemic.
Outcome: The EBIT margin, adjusted for items affecting comparability and metal prices, amounted to 17 percent in 2020. The EBIT margin was 13, 16, 18 and 18 percent in 2016, 2017, 2018 and 2019, respectively.
45%
Outcome: The average payout ratio in 2016–2020 amounted to 45 percent. Sandvik's strong performance in 2020 resulted in a proposed dividend of SEK 8 billion (0), corresponding to a payout ratio of 75 percent.
Outcome: The target was achieved as the net debt to equity ratio was 0.04.
1)The growth and dividend targets refer to average through a business cycle, which is here defined as 2016–2020.
We have 2030 Sustainability Goals in four areas and we report on KPIs for our own operations to track progress towards targets. In addition to our own operations, we also work with customers and suppliers to achieve the goals.
71 ktons
Target: Our target is to reduce our waste to 38.81) ktons by 2030, a 50 percent reduction. To be in line with this target we should reduce waste to 71 ktons by 2020.
Target: Our target is to reduce our CO2 emissions to 1661) ktons by 2030, a 50 percent reduction. To be in line with this target we should reduce CO₂ emissions to 304 ktons by 2020.
4.2
Target: Our target is to reduce our Total Recordable Injury Frequency Rate (TRIFR) to 2.31) by 2030, a 50 percent reduction. To be in line with this target we should reduce the TRIFR to 4.2 by 2020.
Target: Our target is to increase the share of women in managerial positions to one third by 2030. Our target was to have 18.6 percent female managers by 2020.
We reduced our waste by 18 percent to 71 ktons, mainly due to reduced production volumes. We have excluded tailings from our mine operations and slag from our steel manufacturing, amounting to more than 80 percent of the total waste, since our ability to impact these volumes is limited.
CO2 emissions fell by 17 percent, mainly due to low activity levels caused by the Covid-19 pandemic. Production was shut down in India in the second quarter and traveling was reduced to a minimum.
3.2
The number of injuries recorded during the year (133) and the Total Recordable Injury Frequency Rate (3.2) marked the lowest outcome ever for Sandvik. Regrettably, two fatalities were reported, the first since 2015.
The share of female managers increased to a new top level by the end of the year, 18.5 percent. We have a plan in place to accelerate the increase of female managers in the years to come, which is necessary to achieve the 2030 goal.
The baseline for our Sustainability Goals is the average outcome 2016–2018. The dotted line is an indication of how well we are in line with the 2030 targets. TRIFR and CO₂ emissions are exceeding the required results, waste is on par and female managers below.
1) The targets are adjusted for structural changes.
Launched in 2019, our Sustainability Goals are in place to help us make the shift to a more sustainable business. This will help our planet and bring greater value to the company, our customers and other stakeholders.
Our Sustainability Goals 2030 take a holistic approach that includes customers, suppliers and our own operations in its scope. In 2020, we reported regularly on sustainability KPIs in our interim reports to ensure we are on track to achieve our goals. The four goal areas have also been included in the business area review process, and across the organization all divisions have developed roadmaps to achieve the goals in their most relevant areas. We have a team responsible for ensuring that sustainable supplier management is integrated into the daily
purchasing procedures and performance management of the organization.
Our main contribution to sustainability is through our products and solutions. For example, our electrically powered mining equipment and highly efficient and precise drills help our customers improve their productivity and work environment, while reducing waste, energy and emissions. We also contribute to medical improvements and improved quality of life with, for example, our ultra-fine medical wire for devices such as pacemakers and hearing implants.
We will drive the shift to more circular business models and use of resources, finding ways to close loops and generate new revenue streams from the processes and materials we use.
Our goal: More than 90 percent circular
In 2020, 82 percent of our steel produced was made from recycled material. Steel wear parts produced at our Svedala site in Sweden are made from 91 percent scrap. In our metalcutting operations, we initiated a program to identify packaging solutions based on non-fossil material. We began using recycled plastic around our stainless steel tubes. In our Rebuild program, we extend the lifecycle of mining equipment by refurbishing the entire unit at optimal intervals. In 2020, we did a number of Rebuild projects. Slag residue from our steelmaking process is being reused to make new products such as concrete blocks and asphalt. 18 of our production sites reported a 100 percent waste recovery rate.
We will deliver on our commitments to reduce our climate impact. We are aiming to shift mindsets and outcomes in our own business, for our customers and with our suppliers to help reach our targets.
Our goal: Halve the CO₂ impact
Yearly targets for energy efficiency improvements are defined and followed up on by all divisions. Among the initiatives are a clean electricity supply initiative with Purchase Power Agreements and green certificates, vehicle electrification and efforts to reduce our transport impact. The launch of a new battery loader will reduce heat and emissions for our mining customers. In two years (2017– 2019), we have reduced the airfreight for rock tools, cutting CO2 emissions by 40 percent. New electrical furnaces in the mining operations reduce energy consumption. By changing to a more energy-efficient lime in our steel mill in Sandviken, we were able to achieve an indirect reduction of 5,800 tons of CO2 per year. All Sandvik Coromant sites are part of the "Green Factory" vision to reduce carbon emissions. Scope 3 emission monitoring in areas such as transportation of products and people was initiated. Biogas was used for the first time in the steel mill and hot rolling production in Sandviken, Sweden.
We will integrate sustainability targets in our performance management systems in 2021.
Our Code of Conduct and The Sandvik Way governance framework support well-functioning and efficient governance. The Code of Conduct was updated in 2020.
We drive change through transparency of our progress, learnings and ways of working. In 2020, we included key sustainability KPIs in our interim reporting.
Each year we award the best sustainability innovations within the company with the Sandvik Sustainability Award in Memory of Sigrid Göransson. In 2020, the award was given to the Kanthal division for its "gas to electric" solution that helps customers reduce their CO2 emissions by converting from fossil gas furnaces to electrical furnaces.
We encourage individuals to present sustainability ideas or innovations through an IT platform, and have a target to reach 100,000 proposed ideas or innovations by 2030. Pilot projects were underway in three locations in 2020.
We aspire to the highest standards for people and will continue to raise these standards in line with our goal of zero harm.
Our goal: Zero harm to people
We are rolling out health and well-being programs to all employees. In 2020, we put extra focus on the psychological health of employees as remote work increased due to the Covid-19 pandemic. At Sandvik Coromant, all managers were offered safety training and we became more proactive in investigating hazards. At the Svedala site, a robot will replace 80 percent of the manual work involved in grinding, reducing the risk of back problems, joint and muscle pain and "white finger syndrome". The Tampere site in Finland invested in a so called exoskeleton. It allows for limb movements with increased strength and endurance and aims to provide back support.
We will constantly aim higher in ethics and transparency, being a leader in playing fair and being open. Our goal: Always do the right thing
We continued to roll out our compliance tool, the Compliance House. In 2020, we launched a global training program in diversity and inclusion in which about 20,000 employees participated. About 8,500 employees participated in compliance training and 3,500 employees received training in competition law. Sandvik supports numerous community programs related to education, innovation and health and encourages all of its employees to participate. In 2020, Sandvik in Norway sent obsolete PCs to Uganda to be used by students. In Brazil, we introduced an employee parenting program, including prenatal care and the option of flexible working hours.
Sandvik has defined some external factors and drivers that impact our company. Together with customers and other stakeholders, we will seize the opportunities they create in order to generate profitable growth, manage risks and minimize our environmental impact.
New materials, such as innovative alloys, nanomaterials and advanced powder technologies are creating new opportunities. Lower weight, improved strength and anti-corrosion resistance are examples of properties in demand.
Sandvik is a world leader in materials development and produces materials with customized properties for new applications. Metal powder can be used as a raw material in applications with high demands on hardness, strength or ability to conduct electricity and heat. Sandvik is strengthening its position in the rapidly expanding markets for metal powders and additive manufacturing (3D printing).
Historically, design, machining and analysis have been three clearly defined phases in metal cutting. New technology and digitalization are leading to the integration of the three stages to form a seamless manufacturing process.
Sandvik offers digitalized solutions and services to optimize its customers' operations and its own operations pertaining to costs, productivity and environmental impact. Data collection, for example in mining equipment, enables advanced analysis to optimize processes and to predict maintenance needs. Other examples include automated mines and digital tools.
A growing global population and economy will require a transition to more sustainable energy and technologies as well as an increased degree of recycling.
Sandvik is contributing with new solutions, such as electric mining equipment, and is developing materials for solar panels and hydrogen-powered cars. We are developing new technologies in metal cutting that help to improve productivity and reduce environmental impact. We aim for resource efficiency in our own operations and have the ambition to achieve as high a recycling rate as possible to contribute to a circular society.
Macro factors such as globalization, urbanization, political governance, and cyclical conditions influence Sandvik. Changes in circumstances for trade, such as customs duties or new legal requirements also impact the industry. Our global presence, our decentralized work procedures and our regulatory affairs allow us to be flexible and adapt to changes in circumstances. All of our business areas have business and action plans in place to manage changes in market conditions.
The manufacturing industry is experiencing one of the greatest transformations ever, a transition often referred to as Industry 4.0, and it involves a shift to digitalization and automation. Access to Big Data, sophisticated analytical tools, robotization and artificial intelligence are creating new business opportunities. This also leads to better business intelligence, new ways for people to interact with machines and new opportunities to transfer digital instructions to physical products, enabling realtime decisions in machining processes. The development contributes to reduced costs, increased productivity and improved management of fluctuations in demand.
Sandvik invests in additive manufacturing, or 3D printing, a technology that requires fewer manufacturing steps and reduces impact on the environment by producing lighter products with less raw material. Multi-axle technology, enabling the machining of a material from several different angles, improves efficiency and enables completely new types of products. Optimizing manufacturing processes reduces carbon emissions and costs and increases productivity.
Read about our risk management on page 54.
Sandvik is committed to the UN Sustainable Development Goals (SDGs). We have defined the goals that are most relevant to us and to which we actively contribute. Below are some examples.
| SDG | Goal | Examples |
|---|---|---|
| SDG 3 Good health and well-being |
Exera® medical wire, used in medical applications, helps to improve people's quality of life. In 2020, we launched the battery loader Sandvik LH518B. It reduces heat and emissions underground, help ing mine customers reach their sustainability targets and reduce ventilation costs. |
|
| SDG 5 Gender equality |
We drive different initiatives to support gender equality and have set a goal to have one third female managers by 2030. In 2020, we introduced an employee parenting program in Brazil and we made it possible for female employees in India to do shift work in a safe way. For many years we have been offering daycare for employees' children in India. |
|
| SDG 7 Clean energy |
We use clean electricity in all our European production sites (20), one in the US and one in Brazil, corresponding to 84 percent of our electricity usage. We deliver stainless steel tubes to the world's first industrial supercritical gasifier for production of renewable gas. |
|
| SDG 8 Decent work |
One of our long-term sustainability goals is zero harm to people. Our AutoMine® mining automation solution is an example where people are moved to a safer and healthier work environment. |
|
| SDG 9 Industry innovation |
Our industrial heating solutions help customers reduce their CO₂ emissions by converting from fossil gas furnaces to electrical furnaces. On-demand additive manufacturing of titanium powder is transforming the medical industry. |
|
| SDG 12 Responsible production |
Our goal is to drive the shift towards a circular society. We have extensive recycling schemes and buy-back programs in place. Sandvik steel is derived from 82 percent recycled material. 18 of our production sites have a 100 percent recovery rate. |
|
| SDG 13 Climate action |
We will halve our CO₂ impact by 2030. All divisions have set targets for energy efficiency and reduced carbon emissions. The Rock Tools division has reduced carbon emissions by 40 percent (2017–2020) by moving from airfreight to other means of transport. |
Read more on how we contribute to the UN SDGs on page 10 or at: home.sandvik/sustainablebusiness
2020 proved to be a solid year for Sandvik Mining and Rock Technology, despite the challenging market environment due to Covid-19. The lower demand in the aftermarket was offset by strong increases in equipment orders.
Sandvik Mining and Rock Technology manufactures equipment and tools for the mining and construction industries and offers service and digital solutions that help customers maximize their productivity and profitability. The vast majority (83 percent) of our sales are in the mining segment. The business area provides equipment, rock tools, wear and spare parts for rock drilling, rock cutting, crushing and screening, loading and hauling, tunneling, quarrying and breaking, and demolition. Sandvik Mining and Rock Technology is leading the mining industry when it comes to automated loading and hauling systems in underground mines.
As of January 1, 2021, the Crushing and Screening division formed a new business area – Sandvik Rock Processing Solutions, to further accelerate profitable growth within rock processing. The Crushing and Screening division mainly addresses separate parts of the value chain and faces different competition than the other Sandvik Mining and Rock Technology divisions. Sandvik Mining and Rock Technology also changed its name to Sandvik Mining and Rock Solutions.
Despite hesitancy in customer decision-making due to Covid-19, the underlying mining market sentiment remained robust during the year. Commodity prices held up, despite a decline earlier in the year and metal prices recovered well in the latter part of the year. The big driver was gold, which reached a record high and is where the
Commodity exposure
Gold, 38% Copper, 17% Coal, 10% Platinum, 6% Zinc, 6% Iron ore, 5% Diamonds, 2% Other minerals, 6% Other metals, 5% Other base metals, 5%
Asia, 21%
North America, 20% Africa/Middle East, 19%
Australia, 18% Europe, 15% South America, 7%
| Overview, MSEK | 2019 | 2020 |
|---|---|---|
| Order intake | 44,379 | 41,403 |
| Revenue | 44,777 | 40,032 |
| Operating profit | 8,602 | 7,389 |
| Operating margin, % | 19.2 | 18.5 |
| Adjusted operating profit1⁾ | 8,911 | 7,923 |
| Adjusted operating margin, % | 19.9 | 19.8 |
| Return on capital employed, % | 32.3 | 28.0 |
| Number of employees2) | 14,229 | 14,178 |
| Gender balance (men/women), % | 84/16 | 84/16 |
| Women in managerial positions, % | 17.0 | 17.8 |
| Lost time injury frequency rate (LTIFR) | 0.6 | 0.8 |
| Total recordable injury frequency rate (TRIFR) |
3.4 | 3.0 |
1) Operating profit adjusted for items affecting comparability of SEK -533 million in 2020 and SEK -309 million in 2019. 2) Full-time equivalent.
In September, Sandvik launched a new concept vehicle with an Automine® mining automation solution. It is the world's first autonomous underground mining machine designed ground-up for automation.
business area has its biggest exposure. Strong commodity prices, combined with a low oil price, meant that many mining companies were very profitable. Australia, in particular, had excellent growth during the year and is, along with South Africa, our largest markets with large orders booked in the second quarter. Equipment orders stayed healthy during the year but due to Covid-19 and access issues, there was less maintenance performed and this had a negative impact on the aftermarket.
Our business area is focusing on five main areas to strengthen our market position. This includes cementing our leading position in autonomous mining equipment and working more with electrification and digitalization. We will evolve our portfolio through further partnerships and acquisitions. Safety and sustainability are at the top of our agenda and we are continuously working to identify the sustainability impact of our offering and bring value to our customers.
We focus on fast-growing commodities and have a high exposure to gold and electrification minerals. These are the minerals such as copper, nickel, zinc and lead, which are in high demand with the electrification of society. These commodities are growing faster than the industry as a whole and growth is also higher for underground applications where we have our largest exposure.
Our aim is to grow our market share in our core businesses. One of the biggest opportunities is within surface drilling, where we have a strong new competitive offering (see page 18) in the market that delivers the best productivity and cost of ownership. Expanding the aftermarket is something we do by having the best products, expertise close to or at our customers, connecting the equipment and collecting data to be able to maintain the products better than anyone else. We are also looking at new business models, such as selling battery packs as a service for our battery electric vehicles.
We aim to grow through acquisitions and entering partnerships in our core offering or adjacent technologies. We will turn around or divest the few businesses that we have that are not performing. In October, we completed the acquisition of Allied Construction Products LLC (Allied), a US distributor of hydraulic hammers to the construction and mining industries and manufacturer of compactor plates and mounting brackets. In December, we signed an agreement to acquire the market-leading underground safety solutions company DSI Underground.
We aim to shape the industry ecosystem with new technologies, products, companies and partners related to electrification, digitalization and automation. In July, we announced a partnership with Exyn Technologies Inc. where customers will benefit from the unique combination of Sandvik's world-leading digital mining solutions and Exyn's deep knowledge of autonomous aerial robot systems. In September, Sandvik presented an autonomous concept vehicle, equipped with an AutoMine® mining automation system (see page 18).
With the electrification of our equipment, we can help our customers reduce their use of diesel and make the mining environment a safer and healthier one. In November, Sandvik and Barrick, the world's largest mining company, signed a partnership agreement for battery electric vehicles for underground hard rock mining.
We continue to focus on internal efficiencies within our decentralized structure to be sure we have the agility to deliver according to fluctuations in market demands. We also work with a flexible manufacturing set-up using both inhouse and subcontracted manufacturing resources. We retained a healthy adjusted operating margin of 19.8 percent, supported by cost measures announced in 2019 and temporary savings in 2020, such as reduced travel, temporary layoffs, structural changes to further decentralize, and staff reductions.
We are gradually divesting product groups that fall outside of our core capabilities. During the year we completed the divestment of the oil and gas-related parts of Sandvik Drilling and Completions (Varel) and announced the divestment of our mineral exploration business.
Our biggest sustainability impact is through our offering, which helps our customers increase productivity, reduce their environmental impact and become safer. We are doing this by developing products and solutions that require less fuel and electricity, automating mining equipment for better productivity and durability, and developing products and solutions that contribute to a safer and healthier work environment. For example, Sandvik LH518B, the world's first 18-ton battery loader, reduces heat and emissions underground, helping mines reach their sustainability targets and reduce ventilation costs. In addition, we are recycling cemented carbide for rock tools, which reduces both energy consumption and CO2 emissions compared to using virgin materials. In crushing and screening we recycle 90 percent of the wear parts. By focusing on logistical planning and using smart tools to track the most sustainable routes, we cut a big amount of emissions. We are also reducing emissions by moving from air transportation to sea and rail. In two years (2017–2019), we have reduced the airfreight for rock tools by 43 percent over and reduced carbon emissions by 40 percent.
We constantly strive to be the employer of choice, offering a work culture and workplace environment designed to attract and retain exceptional people. We consider diversity and inclusion to be key to our success and, as a global organization, offer excellent possibilities to work
in different functions and locations. Health and safety are always a priority. Due to the global nature of Sandvik Mining and Rock Technology's operations, the impact of the Covid-19 pandemic on our business varied according to geography and timing as the virus spread. We introduced robust, site-specific Covid-19 Environment Health and Safety plans, including return-to-workplace risk assessments. Remote working was actively encouraged to help protect those who needed to be in the workplace physically to undertake their responsibilities. Face-toface meetings and travel were actively discouraged, and cross-border travel was subject to approval.
It is fundamentally important that we serve our customers well by having the best services, digitalization and application expertise and are responsive to our customers. Sandvik technology has proven invaluable in supporting customers during the Covid-19 restrictions.
In November, Sandvik, Byrnecut and OZ Minerals announced their mutual achievement of a world-first in teleremote development drilling. The Crushing and Screening division achieved a Sandvik-first by completing remote Factory Acceptance Testing (FAT) and pre-commissioning of the automation system for two new CH890i cone crushers. We also demonstrated our ability to bring value and serve our customers by signing several large equipment orders, including multi-year service contracts in Australia, South Africa and Ghana.
She was awarded Female Leader of the Future 2020. Meet Nina Åxman, Head of Global Operations at Sandvik Rock Tools.
Equipment for drilling, cutting, breaking, crushing, loading and hauling. Drilling consumables (rock tools), service, spare and wear parts.
Mining: Consolidated customer base of some 200 global major and junior miners. Remote locations, decreasing ore grades as well as safety requirements drive volume output and need for semi- to fully automated solutions. Significant aftermarket business.
Construction: Sandvik is active in the niche areas of rock excavation and comminution. The customer base is fragmented with more than 25,000 individual customers. Localized offering and local competition.
Mining: Consolidated in certain segments, i.e. underground hard-rock mining: Epiroc, Metso Minerals, Caterpillar and Komatsu Mining.
Construction: Some global competitors present in several niches: Epiroc, Terex, Metso Minerals, Caterpillar and Furukawa. Many local players.
Mining: Direct sales ~95 percent with worldwide service network. Construction: Due to a fragmented customer base, 50 percent of sales is via distributors. Global sales and service organization.
Grow aftermarket business on the installed base. Expand market share in surface drilling. Climb the service ladder by data-driven productivity and advanced services. Automation, electrification and exploring complementary technologies and offerings through mergers and acquisitions.
Various forms of business environment risks with an impact on the mining and construction market in general, such as increased market competition with new technological developments and the emergence of new competitors, fluctuations in commodity prices and compliance-related risks. Political uncertainty in some parts of the world.
The concept vehicle is based on the latest technologies and equipped with completely new sensing capabilities and artificial intelligence to enhance mining operations. It is the world's first fully autonomous underground mining machine, designed ground-up and built specifically for automation.
The electric-battery loader has been designed from the ground-up to take advantage of all the benefits of electric drive technology. It produces no underground exhaust emissions and significantly less heat than traditional diesel engines, supporting mining customers to reach sustainability targets. Batterypowered equipment reduces ventilation requirements deep underground, having a positive impact on the bottom line.
Top Hammer XL is a new groundbreaking drilling system for large hole sizes, 140 to 178 mm top hammer drilling in surface mining applications. The system includes a Pantera® DP1600i drill rig, a RD1840C rock drill and a LT90 rock tool – all designed to work seamlessly together for optimum performance. Field tests show a 50 percent reduction in fuel consumption, a 25 percent reduction in total drilling costs and a 15 percent increase in productivity compared to the downthe-hole (DTH) drilling method.
Sandvik 365 parts and services offers round-the-clock service, qualified engineers and genuine parts on demand. Our comprehensive aftermarket offering includes service solutions to add even more value to customer operations, and genuine parts to extend equipment lifetime.
Sandvik surface drilling equipment is renowned for durability, reliability and productivity. Our surface top hammer, surface down-the-hole and dimensional stone drilling rigs deliver low total cost of ownership in quarrying, opencast mining and construction applications.
Our underground drill rigs are engineered to maximize productivity in mining and tunneling applications. Equipped with high performance hydraulic rock drills, they are ergonomic, efficient and reliable. Our underground drill rigs and rock drills are designed to deliver the lowest possible cost per meter drilled and a low lifecycle cost.
Our continuous mining and tunneling equipment reflects the unique advantages of total in-house control over equipment and cutting tools alike. Optimized cutting technology and machine design result in high productivity, long service life and low total costs.
Our underground loaders and haul trucks are engineered for safety, productivity and reliability in the toughest of applications. Rugged, compact and highly maneuverable, the ergonomic products offer enormous capacity for their size and return a very low cost per ton.
Sandvik crushing and screening solutions are engineered for productivity in mines, quarries and civil engineering projects. We also supply individual crushers and screens, as well as key components and consumables.
The mining automation system AutoMine covers all aspects of automation, from single equipment to full fleet control. Operators can remotely control and monitor a fleet of driverless loaders, trucks or drill rigs.
Sandvik offers the world's most comprehensive range of rock tools. As world leaders in steel and cemented carbide technology, our products have revolutionized the rock drilling industry, while our advanced tool systems for mining equipment raise productivity sharply.
LKAB's Kiruna mine is the world's largest underground iron ore mine. In February 2020 Sandvik delivered the first Toro LH625iE, the largest of its cable-electric loaders, to the mine.
The industry's largest capacity underground loader is helping the world's largest underground iron ore mine stay at the forefront of technological development.
Per Brännman, LKAB.
OUR OPERATIONS
Nearly 1.5 billion tons of crude iron ore have been extracted from the depths of LKAB's Kiruna operation in Sweden since mining began in 1898. Kiruna's orebody is approximately 80 meters wide and four kilometers long, and reaches a depth of up to two kilometers. The deeper the mine has developed, the more costly and complex ventilation has become.
"We had to scale up the mine and for that you need bigger machines, but we saw a lot of problems to take in diesel," says Per Brännman, who oversees the mine's 300-person loading division. "It's not just that you have to put in more ventilation to get a good environment, you also have to do more tunneling. Diesel was just not an option if we wanted to have big, productive machines down here."
Kiruna was among the industry's earliest adopters when it trialed its first cable-electric loader in 1985, and within a few years the mine decided to migrate to electricpowered production equipment.
With no exhaust emissions, less heat, fewer vibrations and lower noise levels, electric motors improve underground conditions and operator comfort while considerably reducing ventilation requirements. Electric equipment can also reduce a mine's energy costs to a fraction of a comparable diesel-operated unit.
Today the mine relies heavily on a fleet of 17 Sandvik LH625E electric loaders, whose 25-ton payload capacity is essential for achieving Kiruna's daily target of 85,000 tons of ore feed material.
The oldest of the mine's Sandvik loaders is 13 years old and has more than 35,000 production hours, and the legacy units have outdated components. What began as a project to modernize those, and a side project to enhance the cable reeling system, ultimately evolved into a completely upgraded loader model.
"We are very satisfied with the old loaders," Brännman says. "So we wanted that machine, but Sandvik said to us that, 'A lot of these things are obsolete.' After much discussion, we took the decision together with Sandvik to build a new one. And that we did."
Sandvik collaborated closely with LKAB to customize the design of its Toro™ LH625iE loader to meet Kiruna's needs. These included better energy efficiency than the original model with the same industry-largest 25-ton payload capacity, and a larger, more ergonomic operator's cabin.
The new system initially presented some challenges, but LKAB and Sandvik worked together to overcome them.
"With some small adjustments, it works very well right now," Brännman says. "It's really important that we have equipment with the productivity to deliver the high volume of rock we need. If we're not delivering the tons, we can become a bottleneck."
Kiruna received its first two loaders in 2020 and three more will be delivered in 2021 and its sixth in early 2022. LKAB has an option for two more.
"If you're going to do a project like this together, you have to be very open-minded from both sides," Brännman says. "I recommend Sandvik because of their professionalism. In that I include open-minded, keen and very skilled. A win-win collaboration, I would say."
Sandvik Manufacturing and Machining Solutions experienced a turbulent year, due largely to the Covid-19 pandemic which hit the aerospace and automotive segments particularly hard, but still managed to deliver favorable margins. A reorganization of the business area will help create more business opportunities and strengthen our position in future digital solutions.
Sandvik Manufacturing and Machining Solutions manufactures tools and tooling systems for engineering industries worldwide. The business area also offers digital technology for metal cutting, and advanced materials and solutions for additive manufacturing (3D printing). The majority of the business area's customers are in the general engineering sector, followed by the automotive, aerospace and energy sectors.
In 2020, we announced a decision to restructure our organization into two business area segments: Sandvik Machining Solutions and Sandvik Manufacturing Solutions. As of January 1, 2021, the business area changed its name from Sandvik Machining Solutions into Sandvik Manufacturing and Machining Solutions.
Our traditional tool business and brands, Sandvik Coromant, Walter, Wolfram, Seco and Dormer Pramet, are gathered in the new Sandvik Machining Solutions business area segment. The Sandvik Manufacturing Solutions business area segment focuses on related technologies and digital solutions and includes the divisions for Metrology, Additive Manufacturing and Design and Planning Automation.
Revenues by customer segment
Overview, MSEK 2019 2020
1) Operating profit adjusted for items affecting comparability of SEK -1,494 million in 2020 and SEK -930 million in 2019. 2) Full-time equivalent.
The World Economic Forum has officially recognized the production unit in Gimo, Sweden as an advanced Industry 4.0 facility.
All sectors were heavily affected by the Covid-19 pandemic, and especially the aerospace and automotive sectors, where the demand for cutting tools decreased. The automotive segment started to recover in the third and fourth quarter. Our general engineering sector performed somewhat better during the year. The Asian markets began their recovery in the second quarter, particularly in the mid-market tool segment. In the beginning of the pandemic we were forced to temporarily shut down some factories but our global footprint gave us the flexibility to continue delivering products to customers all over the world.
Despite the downturn, we proved our resilience to market shifts. We adapted quicker than in the past to changing market situations and have become more proactive, with a culture of continuous improvement to increase efficiency, secure recovery and continue to tap into market opportunities moving ahead.
Our growth agenda is based on both organic growth and acquisitions. The 2025 target is to have SEK 5 billion in total sales connected to adjacent business and expanded digital offerings, mainly deriving from the new business area segment Sandvik Manufacturing Solutions. Our core business should grow faster than the market, organically and through acquisitions. Adding value to our customers through improved efficiency and optimization remains our focus throughout the whole offering. The efforts in digital machining will take us even further in our journey to machining solutions with an end-to-end impact.
In 2020, we acquired US-based software company CGTech. The acquisition will enhance our capabilities in machining intelligence and strengthen our software offering for machining. We also acquired Quimmco Centro Tecnológico, offering integral machining solutions, and Miranda Tools, which furthers our geographic expansion in Asia. Our partly owned additive manufacturing company, Beamit, acquired Zare, an additive manufacturing company focusing on high-end components. We also divested a 10 percent minority interest in Gesac, a Chinese supplier of tungsten powder, cemented carbide and cutting tools.
Our metalcutting business is on a journey from providing tools to providing complete solutions that combine hardware, software and services. Through automation, machine monitoring and optimized manufacturing processes we are integrating digital systems to allow all parts in a machine shop to communicate, all the way from quotation to certification. This improves efficiency for our customers by reducing their total production time.
With the creation of the business area segment Sandvik Manufacturing Solutions, we can focus more on digitalization to strengthen our position in metal cutting
and digital manufacturing. This will lead to new business opportunities and make customers even more productive and sustainable.
We continue to challenge ourselves and improve our efficiency and profitability as part of our continuous improvement culture. These efforts apply to every aspect of our business. We are also looking into where we can leverage synergies and work more efficiently as a multi-brand group, for example in the areas of supply and logistics or by optimizing production facilities and research and development.
A priority in 2020 was to secure service and on-time deliveries to our customers, something that was achieved through an increased flexibility in logistics. Our costs were lowered by quickly shifting marketing and sales activities to virtual events, cutting down substantially on travel, and reducing work hours. We consolidated our footprint due to restructuring and optimization efforts, resulting in the closure of production units in Frankfurt and Delmenhorst, Germany and Orléans, France.
Our productivity improvement program, along with our digital offering and exceptional tool life, increase customers' productivity and efficiency while reducing energy, emissions and waste.
Sandvik is an industry leader within material recycling. A customer buy-back program has been in place since the early 1990s, whereby we reuse the materials from used cemented carbide tools. Our Wolfram division is a world leader in cemented carbide recycling and over the past three years it has significantly increased the recycling rate of tungsten. Our recycling efforts have extended to our packaging where we have a program to identify solutions based on non-fossil materials. Sandvik has also been instrumental in the development of vegetable-oil lubricants, which help promote a healthier work environment when working with moving machine components, for example.
Efforts continue within our own operations to reduce our energy consumption and CO2 emissions through various initiatives, such as replacing conventional oil with non-fossil solutions. A global clean electricity solutions initiative is underway to identify how to best transfer to clean and carbon-free electricity solutions. We have a "Green Factory" program in place for Sandvik Coromant with focus on reducing carbon emissions, increasing recycling rates and implementing energy improvements at sites. Yearly targets for energy efficiency improvements are defined and followed up by all divisions.
We work proactively to attract people with the competencies necessary to support our transition to Industry 4.0 and the selling of total machining solutions. We offer a flat organizational structure and a modern way of working that is attractive for that type of talent. In addition to recruiting
people with skills and know-how in robotics, artificial intelligence and digitalization, we are acquiring these skillsets through our strong acquisition agenda. We also continue to develop strong and diverse leadership skills, which have become even more crucial as remote work increases.
Health and safety continues to be our number one priority and in 2020 we supported employees working from home and promoted health and safety when at our sites. We put extra focus on the non-routine risk areas. For example, Sandvik Coromant initiated events to increase the focus on hazards reporting in order to prevent incidents. Activities were also held to improve the quality of investigations related to injuries with an emphasis on sharing and learning between sites.
In July, a tragic accident occurred at our plant in Gimo, Sweden, in which two employees lost their lives. We collaborate with authorities to investigate the cause of the accident. Our thoughts are with the relatives and close colleagues of the deceased.
In addition to physical health and safety, the psychological health of our employees is on our agenda. With so many employees working from home in 2020, we put extra emphasis on providing the right tools and keeping them connected emotionally. Psychological well-being is a big part of our safety meetings where we encourage everyone to speak up, give their opinion and ask questions. We conducted employee surveys to find out how employees felt working from home and how we could support them. We offered online motivational training and developmental training, and diversity awareness training for managers.
In our employee survey, the engagement rate improved to 80 percent (77 in 2018). Our scores improved more or less for all dimensions and in particular in employee health and welfare, which increased from 77 to 84 percent.
Delivering on time, being readily available and providing added value to customers are a few of the ways we aim to be the customer's first choice. Having a strong digital presence enabled us to effectively address all of these areas while facing the challenges of the Covid-19 pandemic. Our digital offering adds customer value. Our sensor-embedded tools, for example, ensure higher efficiency in our customers' workplaces.
Sandvik aims to lead the industry and become the customer's first choice within sustainability. We are providing customer solutions that raise performance, reduce setup times
and cut down on energy consumption. Our Wolfram smelter has conflict-free certification and we support our customers in fulfilling the obligations of the US Dodd Frank Act as it relates to supplies from conflict-affected areas.
Providing customers with a leading and sustainable offer within metal cutting delivered via multi divisions and brands in the form of metal cutting tools, additive manufacturing, know-how and digital solutions.
Cutting tools represent a small share of the total manufacturing cost for customers, however they are significant for the productivity. Service levels and product solutions are the main differentiators for the premium offering. Lower degree of service for mid-market which is more price sensitive.
Direct sales ~55–60 percent. Distribution sales are predominant in North America whereas direct sales are predominant in Europe. In Asia, mainly distribution sales with limited service offering in the mid-market segment and direct sales, with high service level, in the premium segment.
Expansion through organic growth, innovation and niche acquisitions in the core. Expansion into digital solutions and additive manufacturing supporting customer value chains.
Various forms of business environment risks with an impact on the metal cutting market in general, mainly changes in customers behavior, acquisition-related risks, structural changes in our industry, information security risks and compliance-related risks.
Harald Kissel, R&D manager, is passionate about the opportunities that additive manufacturing in metal can bring – like being able to print custom-made medical implants.
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The Additive Manufacturing division commercialized a state-of-the-art titanium powder plant in Sandviken, Sweden enabling Sandvik to offer the widest material range for additive manufacturing on the market. The new plant received an AS9100D certification for deliveries to the aerospace industry and an ISO 13485:2016 certification for deliveries to the medical segment.
An innovative parting-off system. With the G4014-P groove turning holder and the double-edged DX18 indexable inserts, Walter launched a new system for grooving and parting off on the market.
The new generation steel turning grades GC4425 and GC4415 bring enhanced technology in every single aspect. They outperform competition in a majority of steel turning applications and provide improved wear resistance, heat resistance and toughness, considerably expanding the application range.
Seco's shoulder mill ensures less power consumption, smoother cutting, longer tool life and better results. The cutter body is made of an optimized corrosionresistant tool steel with all the properties necessary for longevity and toughness in milling applications. Double Turbo has less environmental impact since nickel coating is unnecessary. In addition, the double-sided insert design gives significant cost-per-edge savings.
Our complete range of metal-cutting tools and tooling systems, coupled with the market's widest range of technical services, help customers optimize the manufacture of high quality components.
Milling is the process of machining using rotary cutters to remove material. Milling can be done on flat surfaces, shoulders, slots, gears or complex 3D shapes. Milling is used, for example, to produce landing gears and turbine blades for airplanes.
Turning generates cylindrical and rounded forms with a single-point tool. The tool remains stationary while the work piece rotates.
Through automation, machining monitoring, metrology and optimized manufacturing processes, we aim to integrate digital systems and allow all parts in a machine shop to communicate, all the way from quotation to verification. This increases speed and quality of the design and planning processes.
When drilling, there are a multitude of characteristics to consider such as positioning accuracy, hole geometry and surface finish. Our range of drills has been designed with optimum hole quality in mind.
We have expertise across the entire additive manufacturing chain and can offer the widest range of powder alloys on the market.
Productivity rose by an incredible 2,000 percent when Japanese valve maker Fujikin began using a solid carbide drill from Sandvik Coromant, CoroDrill® 860-PM.
High precision and quality are absolutely essential for Japanese company Fujikin, whose first patented product was the Needle Valve. It was launched for the valve industry in 1953 to help gas flow more precisely. Since then, the valve specialist and manufacturer of ultra-precision flow control systems has been developing equipment for everything from semiconductors to space rockets.
The company's valves and other products keep ultra high-pressure hydrogen and many other fluids flowing safely and efficiently. Today, Fujikin has earned a 65 percent market share in Japan and has a 40 percent worldwide share for its valve equipment used in semiconductor production.
In 2018, Fujikin visited Sandvik in Semine, Japan where the production unit manufactures premium indexable inserts, cutters and holders.
"The customer gained a good understanding of how the high productivity products are made in an effective way and by the following year, started using CoroDrill 860-PM to improve the pilot hole machining for the tapping of semiconductor equipment components," says Koji Itoh, Manager, Solid Round Tool at Sandvik Coromant in Japan.
The components are made of austenitic stainless steel with low carbon. The solid carbide drill is designed to
maximize productivity through high metal-cutting efficiency. Its excellent chip evacuation capability enables machining at high penetration rates.
"The shape of the drill geometry is very unique," says Takeyuki Suzuki, Chief of Tsukuba Advanced Technology Center Component Machining Section, Fujikin. "We chose it for its good performance, the quality of substrate and coating, as well as for its productivity capabilities, stability and the fact that Sandvik Coromant does reconditioning," adding that the latter provides further reliability.
A reconditioning center was opened in Japan in 2019. It is one of a number of specialized centers located around the world that recondition Sandvik Coromant solid carbide tools, reproducing the geometry and coating of the original tool. After a time, when it is no longer economically viable or possible to recondition a tool, it can be recycled through Sandvik's recycling program, which pays customers market prices for their solid carbide.
Since putting the Sandvik drill into action, Fujikin's productivity rose by 2,000 percent and tool life was up more than 65 percent compared to the previous supplier's tools.
2020 was a challenging year for Sandvik Materials Technology, yet we made progress on our strategic journey. Mitigating actions were introduced in time to enable healthy margins despite a severe drop in orders, especially within the oil and gas and aerospace segments, due to the Covid-19 pandemic.
Sandvik Materials Technology manufactures advanced stainless steels and special alloys for industries with high demand on material quality and material knowledge. These materials are light, strong, corrosion-resistant, and can withstand high temperatures and pressures. Our expertise in metallurgy and industrial processes and applications increases customer efficiency and sustainability.
In 2020, the Sandvik Board of Directors decided to proceed with the preparations to distribute Sandvik Materials Technology to Sandvik's shareholders and list the company's shares on the Nasdaq Stockholm Exchange, pending approval by a shareholder's meeting in 2022 and that the circumstances are deemed right at the time. The
decision gives us a clear direction for the journey ahead as a technology leader and partner to our customers.
The health and safety of employees was prioritized during the year, with early and dedicated crisis and safety management at our sites. Consequently, the spread of Covid-19 within our operations was prevented to a large extent.
The first quarter of 2020 was mixed, with some large project orders coming in but also a slowdown in the short-cycle business as market uncertainty increased. Order intake was further affected in the second quarter with increasing market uncertainty and lockdowns in
Energy, 44% Engineering, 20% Consumer and electronics, 12%, Chemicals, 6% Automotive, 5% Mining, 4% Aerospace, 3% Construction, 3% Other, 3%
Europe, 48% North America, 30%
Asia, 17% South America, 3% Africa/Middle East, 2%
| Overview, MSEK | 2019 | 2020 |
|---|---|---|
| Order intake | 16,475 | 11,910 |
| Revenue | 15,279 | 13,598 |
| Operating profit | 1,444 | 492 |
| Operating margin, % | 9.4 | 3.6 |
| Adjusted operating profit1⁾ | 1,787 | 1,032 |
| Adjusted operating margin, % | 11.7 | 7.6 |
| Return on capital employed, % | 11.0 | 3.9 |
| Number of employees2) | 5,726 | 5,084 |
| Gender balance (men/women), % | 81/19 | 81/19 |
| Women in managerial positions, % | 19.1 | 19.4 |
| Lost time injury frequency rate (LTIFR) | 4.7 | 3.9 |
| Total recordable injury frequency rate (TRIFR) |
7.5 | 6.7 |
1) Operating profit adjusted for items affecting comparability of SEK -540 million in 2020 and SEK 1,513 million in 2019. 2) Full-time equivalent.
Bloom casting at the steel mill in Sandviken, Sweden. Special alloys for advanced applications within the energy sector, such as nickel base and duplex steels, are among the materials produced here.
many countries. The segments most heavily affected were the energy segment, mainly oil and gas, as well as the aerospace segment with most airlines grounded. This negatively affected the demand for our stainless steel tubes and other products. At the end of the year there was an improvement in the order intake for the short-cycle business, however the severe drop in order intake, primarily within the oil and gas segment, remained challenging throughout the year.
Demand for our products is driven by a number of factors, including the rising global need for energy and the shift towards fossil-free technologies. We foresee a continued demand for oil and gas, which will continue to be profitable segments. We have identified key segments where we can see a favorable growth potential, such as the industrial heating, medical and renewable energy segments.
Many industries have started the transformation to fossil-free production and in many cases, electrification of heating processes is key to enabling this transformation. Kanthal® is our brand for products and services in the area of sustainable industrial heating technology and resistance materials. Having the technology, expertise and global presence, Kanthal is partnering with energyintensive industries, such as steel and aluminum, to help reduce their carbon footprint. In addition to CO₂ and NOx reductions, our electric solutions provide energyefficient, safe and controllable heat.
We also produce advanced materials for the medical segment which is fast-growing and profitable. We see an opportunity to grow, particularly within the wire-forming and coating area. We also see opportunities with forward integration in the value chain and by adding complementary capabilities. In 2020, our medical business unit opened a site in Arizona, US, enabling us to respond to the growing demand for our products and to come closer to our customers.
Renewables and their share of global power generation are expected to grow substantially, supported by large governmental investments. We will continue to explore and develop business opportunities in renewable energy sources, such as solar, geothermal and biomass, and take a leading position within materials technology for system enablers by primarily focusing on hydrogen and batteries.
We are evolving and advancing together with our customers when it comes to digitalization. One example is the Sandvik Mobile Service Solutions container. It supplies coiled tubing solutions to customers on site, using a digitally connected system to straighten and cut tubing to match customer specifications. This significantly reduces waste compared to delivering a standard tube size, leading to substantial material, time and cost savings. The fully mobile container can be manned in person
or steered remotely for everything from administrative details, such as certification and invoicing, to technological processes like the straightening and cutting of tubing.
Digital developments were accelerated due to the Covid‑19 pandemic, as we needed to find new ways of working and communicating. In India, we developed a method to carry out inspections and testing activities remotely instead of sending engineers to the customer. Everything is digital, from inspection all the way to verification and approval. Remote inspection is highly appreciated by customers and has provided new business opportunities.
Within our tube production facility in Werther, Germany, we quickly adapted to a digitalized set-up. The site had been at the forefront of production development, including integrated digital systems, but the pandemic forced a full-scale pilot. During the pandemic, the site went fully digital. Programmers and automation engineers were connected to all the machines via a network and controlled and supported the functions of the machines from the safety of their homes.
A culture of continuous improvements, flexibility and efficiency are key prerequisites to managing our volatile business. With the downturn during 2020, we acted quickly with mitigating measures to protect our profitability despite a severe drop in order intake. To adjust our cost base to the new demand situation, we took several actions, including reducing work hours and reducing the number of consultants, staff layoffs and postponing investments. Overall, we have protected our margins well in the downturn. By postponing investments and successfully managing our inventory and accounts receivables, we secured a strong cash flow throughout the year.
We are continuously working with our footprint, both to bring it closer to customers, but also from a costefficiency perspective. In 2020, we finalized the closure of our site in Arnprior, Canada and moved the production to Scranton in the US. We also continued moving a production unit from our site in Sandviken, Sweden to Chomutov, in the Czech Republic. During the third quarter, our Tube division announced a reorganization that will result in exiting our site in Charost, France, following the decrease in demand within the aerospace segment.
By fully integrating sustainability into our operations and offerings, we are creating a solid base for conducting profitable and responsible business. Energy efficiency and circularity characterize our steel mills in Sandviken and Hallstahammar, Sweden which use more than 80 percent recycled steel in their production. By changing to a more energy-efficient lime in our steel mill processes, we were able to achieve an indirect reduction of 5,800 tons of CO₂ emissions per year. We also recycle the furnace slag from our steelmaking process and use it to make
new products such as concrete blocks. Among our other sustainability initiatives is a new buy-back program with our partner Stamicarbon to recycle high alloy steel from customers' old equipment.
Our product offering for our customers contributes to more efficient and sustainable processes and end products. We are always striving to find more sustainable solutions to eliminate harm to people and the environment. As an example, Sandvik Materials Technology won "The Sandvik Sustainability Award in Memory of Sigrid Göransson" for a service solution that helps customers reduce their CO2 emissions by converting from fossil gas furnaces to electrical furnaces.
With over 250 employees within Research and Development globally, we are building further on our heritage of innovation and collaboration.
We are taking new paths within our brand and culture to be able to utilize the entire recruitment base and attract more women to the industry. We work actively with diversity and inclusion, showcase the variety of interesting workplaces within our operations, and collaborate with local schools and universities in the regions where we operate to attract employees. During 2020, we continued our work to build competence for the future and launched several digital learning opportunities within our organization.
The safety development within our global operations was positive during 2020, supported by increased focus on local EHS (Environment, Health and Safety) plans. Our organization engaged in a number of activities related to combating the pandemic, for example by donating Personal Protective Equipment to the local communities in which we operate.
Sandvik Materials Technology is a niche player within our industry with unique competence and material know-how.
The Norwegian company Glasopor is one of few manufacturers in the world that produces foam materials from recycled glass. Its innovative products are used in road and railway construction and as insulation in buildings. The company has boosted its profitability and eliminated its carbon footprint by switching from gas to electricity based on a Kanthal® electric heating system. The goal was to reduce energy consumption by 28 percent; they ended up reducing it by 37 percent and in addition, reduced their CO₂ emissions to zero.
Gary Davies explains how Exera® medical wire can be a life-changer for people with Parkinson's disease or diabetes.
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Tubular products, bars, billets, strip, rock drill steel, resistance material, ultra-fine medical wire and wire-based components, and metal powder.
Selected niches in demanding industries where material requirements, as well as product quality and reliability, are extremely high. High entry barriers.
Nippon Steel and Sumitomo Metal (tube), Tubacex (tube), Jiuli (tube), VoestAlpine (strip), Aperam (heating elements and systems), Fort Wayne Metals (medical) smaller niche players.
About 80 percent direct sales.
Materials technology is needed in many growth segments, improving efficiency, productivity and sustainability in our customers' processes and applications. The oil and gas industry will remain a profitable segment and we have identified several other key growth segments, such as industrial heating, medical and renewable energy.
Fluctuating oil and gas prices. Increased competition of high-tech material from China. Local protectionism in the steel industry.
In 2020, we launched a new super-austenitic grade, Sanicro® 35, with high strength and extreme corrosion properties, making it suitable for a broad range of applications. Designed for highly corrosive environments, it bridges the gap between standard duplex or austenitic grades and nickel alloys.
A more stable and sharper edge convinced a customer to change to the martensitic stainless grade 13c26. The change resulted in higher productivity and improved quality.
Many industrial processes are rapidly being electrified. In this transition, our Kanthal division offers clean, safe, silent and controllable heating solutions that maximize energy efficiency and productivity for all industries with a heating process. One example is the steel industry which aims to minimize its carbon footprint by replacing fossil fuel with sustainable alternatives.
Our wide range of tubular products in corrosion-resistant alloys contributes to more efficient and reliable industrial processes. Our superduplex stainless steel tubes for umbilicals have become the industry standard due to their corrosion resistance, reliability and ability to withstand extreme temperatures and pressures. We have delivered steam generator tubes to more than 100 nuclear reactors worldwide. Our Pressurfect® seamless stainless steel tubes, developed for high-pressure gasoline direct injection (GDI) engines, significantly reduce fuel consumption and consequently lower exhaust emissions. We are a market-leading supplier of titanium tubes for aircraft hydraulic systems and these robust, light and thin tubes help modern fleets reduce average per-passenger carbon footprint.
Electric heating technology products, marketed under the Kanthal® brand, are used primarily for generation, measurement and control of heat in industrial furnaces and home appliances. Electric heating is more energy efficient than fossil alternatives and provide a cleaner and safer work environment for employees. There is a growing demand for electric heating technology. For example, the transition to fossil-free production of steel is dependent on sustainable heating solutions.The transition towards electrical cars is driving the demand for lithium-ion batteries, in which the cathode material must be produced at high temperatures.
Our precision strip steels are used in applications such as compressors, and need to have an extreme fatigue strength. Our compressor valve steel reduces the energy consumption and carbon emissions in, for example, air conditioning. We also offer strip steel with functional coating for different types of fuel cells and in other applications for renewable energy production, such as solar panels.
The medical ultra-fine wire and wire-based components marketed under the Exera® brand are used in life-changing or even life-saving medical solutions. The wire is designed and formed to sense, stimulate or transmit signals inside or outside the human body. It is hence applicable in remote monitoring features that are increasingly in demand for future medical devices. Typical applications are pacemakers, continuous glucose monitors for diabetes care and deep brain stimulation.
Sandvik delivers advanced, seamless stainless steel tubes to the world's first industrial supercritical water gasifier that will help the Netherlands gearing up for a renewable future.
The Netherlands is facing a huge transition to replace natural gas resources with electricity and other gases, such as green gas (methane) and hydrogen. Sandvik customer SCW Systems has developed a method to produce renewable gas in a sustainable way.
"We develop novel technologies to convert wet organic waste streams into carbon neutral, or even carbon negative, energy carriers. The technology uses the fourth natural phase of water – the supercritical water phase – to split molecules to an almost atom level," explains Gerard Essing, CEO of SCW Systems. "This largely untapped phase occurs when temperatures reach 375 degrees Celsius and pressure is higher than 221 bar."
When water is in the supercritical phase, organic substances such as sewage, become extremely soluble. The water becomes a solvent for organic components and a catalyst for a rapid and almost complete conversion of the energy stored in organic components into gas. From this, gas components such as green gas and hydrogen can be stored and used in the same infrastructure as existing gas supplies. As the process uses waste to create hydrogen, it is completely renewable and could help the Netherlands, and the rest of the world, reduce their reliance on fossil fuels.
Together with Gasunie New Energy, SCW Systems has successfully developed, completed and tested the first industrial reactor. Currently the world's first full demonstration facility (~20MW) is under construction and the production of the industrial supercritical water gasifiers has begun.To make its gasifiers, SCW Systems needed advanced materials that could withstand high temperature and pressure.
"Most steels wouldn't make the cut. In addition, because the feedstock used during gasification comes from a variety of sources, advanced seamless tubes in a corrosion-resistant material were required", says Dyon Hermsen, Sales Manager at Sandvik.
After several years of collaborative development and testing, the solution for the gasifiers was Sanicro®, Sandvik grades of nickel alloys and high-alloy austenitic stainless steels. The material used in this specific solution is characterized by its high structural stability, creep strength, and oxidation resistance and has been specifically developed for use at material temperatures up to around 700 degrees Celsius.
"Supercritical water gasification is an important clean energy innovation only if the advanced materials can withstand high pressure and high temperature. The specialists from Sandvik were able to create advanced seamless tubes that meet the challenges of this energy transition technology and support our urgency to act now", says Essing.
Sandvik continues to work with SCW Systems to support the industrial production of its gasifiers. The future for supercritical water gasification is promising. The
Netherlands has set an ambition to produce 2 billion cubic meters of green gas by 2030, of which over 60 percent should be produced by supercritical water technology. Beyond the Netherlands, many countries with an existing gas infrastructure could benefit from the technology.
Dyon Hermsen, Sales Manager at Sandvik.
During 2020, the share price increased by 10.2 percent, while the OMXS30 index on Nasdaq Stockholm increased by 5.8 percent.
Sandvik's shares are listed on Nasdaq Stockholm, Sweden. At year-end 2020, the share price was quoted at SEK 201.3, corresponding to a market capitalization of SEK 253 billion, placing Sandvik as the 11th (10) largest company on Nasdaq Stockholm.
In 2020, a total of 2.3 billion shares (0.8) were traded for a total value of SEK 382 billion (125). Trading in Sandvik shares on the Nasdaq Stockholm accounted for 52 percent (31) of the total volume of shares traded. Other markets, for example, BATS Chi-X, Turquoise, etc. accounted for 48 percent (69). 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 2020, the average daily ADR trading volume was 72,168 (36,450). At the end of 2020 there were 14,828,937 ADRs outstanding (4,192,508).
Our target is that the dividend will amount to at least 50 percent of adjusted earnings per share, through a business cycle. The Board has proposed an ordinary dividend of SEK 4.50 (0) per share and an extra dividend of SEK 2.00 per share to the 2021 Annual General Meeting, corresponding to approximately SEK 8.2 billion (0) and a dividend yield of 3.2 percent based on the share price at year-end. The dividend proposal corresponds to 75 percent of adjusted earnings per share for the Group. Assuming the general meeting accepts the dividend proposal the dividend will be payed as one installment.
The number of Sandvik shares amounts to 1,254,385,923. Each share has a nominal value of SEK 1.2 and the share capital amounts to SEK 1,505,263,108. Sandvik's share capital comprises one series of shares, 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.
The 2020 Annual General Meeting resolved to authorize the Board of Directors, for the period until the next Annual General Meeting, to decide on acquisitions of Sandvik shares, on one or more occasions, up to a maximum of 10 percent of all the shares in the company. The purpose of the authorization is to enable the Board of Directors to continuously adapt the company's capital structure and thereby contribute to increased shareholder value.
Sandvik is included in several sustainability indices, such as the Dow Jones Sustainability Index, FTSE4Good and Ethibel Excellence Europe. These are international indices analyzing global companies that assume their responsible business practices. Sandvik's inclusion in these indices confirms the Group's achievements in relation to sustainable business practices.
In 2020, the number of shareholders increased to 106,289 (100,768). There are shareholders in 77 countries, and the total ownership outside of Sweden amounted to 43 percent (39) at year-end. The ten largest individual shareholders accounted for 37 percent of the share capital on the same date. As of December 31, 2020, members of Sandvik's Group Executive Management owned a total of 109,720 shares in Sandvik. Members of the Board of Sandvik owned a total of 322,229 shares in Sandvik (including deputy board members, excluding the CEO). Total ownership of Group Executive Management and the Board corresponds to about 0.03 percent of the capital and voting rights.
Proposed dividend, SEK
4.50+2.00 Ordinary Extra
| Key figures | 2019 | 2020 |
|---|---|---|
| Number of shares at year-end (million) | 1,254 | 1,254 |
| Market capitalization at year-end (billion) | 229 | 253 |
| Number of shareholders | 100,768 | 106,289 |
| Share price at year-end, SEK | 182.7 | 201.3 |
| Earnings per share after dilution, SEK (Group total) | 6.79 | 6.95 |
| Adjusted earnings per share, SEK (Group total) | 10.96 | 8.61 |
| P/E ratio at year-end | 26.9 | 28.9 |
| Change in share price during the year, % | +45 | +10 |
| Dividend, SEK /share | – | 6.501) |
| Dividend/adjusted earnings per share, % | – | 751) |
| Total yield (price increase + dividend), % | 47 | 13 |
| Propor tion of shares in Sweden, % | 61 | 57 |
| Propor tion of shares owned by the ten largest shareholder groups, % |
39 | 37 |
1) Proposed dividend.
Source: Monitor by Modular Finance AB. Compiled and processed data from various sources, including Euroclear, Morningstar and the Swedish Financial Supervisory Authority.
| The ten largest shareholder groups, as of December, 31, % |
2019 | 2020 |
|---|---|---|
| AB Industrivärden | 12.4 | 12.5 |
| Alecta Pension Insurance | 6.6 | 5.1 |
| Swedbank Robur Funds | 4.4 | 3.4 |
| BlackRock | 2.8 | 2.9 |
| Vanguard | 2.5 | 2.6 |
| L E Lundbergföretagen AB | 2.4 | 2.4 |
| AMF Insurance and Funds | 2.6 | 2.3 |
| SEB Funds | 2.3 | 2.2 |
| Norges Bank | 1.8 | 1.7 |
| Handelsbanken Funds | 1.1 | 1.5 |
Source: Monitor by Modular Finance AB. Compiled and processed data from various sources, including Euroclear, Morningstar and the Swedish Financial Supervisory Authority.
We continue to thrive on our value creating offering of productivity and sustainability based on more than 150 years of leading materials and applications know-how. We stay relevant by advancing the world through engineering, expanding our core competencies and adding new digital technologies, enabling us to broaden our customer offering. Our market-leading position and strong customer relationships combined with a decentralized
organization enable us to respond faster to market trends and customer needs.
In a cyclical world, our decentralized business model helps us to be more flexible, reduce earnings volatility and increase predictability. Our proven resilience in earnings and a strong balance sheet creates a solid platform from which to leverage interesting growth opportunities.
1) Pending shareholders' approval in 2022 and provided that the circumstances are deemed right at the time.
Approximately 25 analysts cover Sandvik on a continuous basis. At year-end 2020, the breakdown of ratings relating to the Sandvik share was: 74 percent buy/increase, 26 percent retain/neutral and 0 percent sell/decrease, according to SME Direkt. Below are some of the most frequent questions discussed in 2020, and our answers.
Q: You have outlined how you are now shifting to a growth-focused strategy, while at the same time keeping the target of at least 5 percent growth over a business cycle. How are you planning to achieve that? A: Looking at our performance over the last business cycle (2016–2020), we had 0 percent growth, mainly impacted by a Covid-19-related negative organic growth of 11 percent in 2020. Our shift to growth strategy is clarifying how we intend to meet the previously set target of 5 percent, where 2.5 percent will come from organic growth and the remainder through acquisitions. To achieve this, all our business areas aim to grow at least 2x the market. In Sandvik Manufacturing and Machining Solutions this will be done by expanding our digital and adjacent offering, increasing our round tool offering and gaining market share in the mid-market segment. In Sandvik Mining and Rock Solutions and Sandvik Rock Processing Solutions we will enhance the aftermarket services and we also see opportunities within surface drilling, to name a few of the opportunities.
A: In 2020, the margin was supported by approximately SEK 4.2 billion from permanent and temporary savings. We are pleased that we were already one step ahead in the beginning of the year, and we have continued to take actions. Most of the targeted savings of SEK 1.3 billion announced in 2020 will be delivered in 2021. The majority of the measures can be described as structural, for example, closure of production units or major restructurings.
A: We recognize this as a challenge long-term, albeit not as material as some might believe, and we are taking actions to offset this headwind. Near- to mid-term we do not see this having any material impact. In the time period 2019–2025 we expect the cutting tool potential to grow at a rate of 1 percent per year, while a flat development is expected in 2025–2030. The total light vehicle production is estimated to grow at a rate of 1.4 percent CAGR 2019–2030.
A: There are several reasons. Sandvik Rock Processing Solutions addresses different parts of the value chain than Sandvik Mining and Rock Solutions does. It also has its own aftermarket and service operations and its activities are centered more downstream on rock processing, while Sandvik Mining and Rock Solutions focuses on rock extraction. This will enable both business areas to focus on their core businesses and at the same time increase the transparency.
A: In 2020, the Board decided that we will proceed with the preparation to distribute Sandvik Materials Technology to Sandvik's shareholders and list the company's shares on Nasdaq Stockholm. The Board intends to propose the distribution and listing of the Sandvik Materials Technology shares at a shareholders' meeting in 2022, provided that the circumstances are deemed right at the time. The intended distribution of shares is expected to meet the Lex Asea requirements and is subject to approval by Sandvik's shareholders.
A: During the year we have seen a great commitment to the 2030 sustainability goals, and they have become a strong driving force all across the company. We have included sustainability KPIs in the performance management review process for business areas and for the Group Executive Management. The business divisions have developed roadmaps on how to contribute to the 2030 targets. In the coming years we will focus on continued data-driven performance management in order to verify that all initiatives are paying off and are in line with our ambitions.
The Covid-19 pandemic made 2020 a challenging year. The market demand was heavily affected, particularly in the short-cycle business and in the oil and gas industries, while the mining industries remained robust during the year. However, in the end of the year the recovery gradually improved for the early-cycle business, mainly the automotive and general engineering segments. It remains difficult to predict the short-term consequences, and in the long-term, the handling of the pandemic and economic policy decisions will determine the speed and strength of the recovery. Meanwhile, our priorities are to continue with precautionary measures to keep our employees and customers safe and to stay focused on executing our savings initiatives while capturing the interesting growth opportunities that lie ahead of us. For the full year, Sandvik's order intake for continuing operations decreased by -12 percent ( -2) and revenues decreased by -11 percent (0) at fixed rates for comparable units.
Sandvik's order intake amounted to SEK 86,288 million in 2020 (104,147), and revenue totaled SEK 86,409 million (103,533). The operating profit was SEK 11,184 million (13,182), corresponding to 12.9 percent (12.7) of revenues. The adjusted operating profit decreased to SEK 14,531 million (19,015) and the adjusted operating margin decreased to 16.8 percent (18.4) compared to the previous year. Movements in metal prices for Sandvik Materials Technology made a negative contribution to the operating profit of SEK -172 million (274). Changes in foreign exchange
rates affected earnings negatively by SEK -974 million (1,879) compared with the preceding year. Net financial items amounted to SEK 54 million (-1,238). The result after financial income and expenses for the Group was SEK 11,238 million (11,945), and SEK 11,270 million (12,150) for continuing operations. Income tax had a total impact of SEK -2,517 million (-3,421) on earnings, corresponding to 22 percent (29) of profit before taxes. Profit for the year attributable to equity holders of the Parent Company was SEK 8,721 million (8,539). Earnings per share for the Group amounted to SEK 6.96 (6.81) and SEK 6.99 (6.97) for continuing operations. Return on capital employed was 13 percent (15) and return on equity was 14 percent (14).
Relative net working capital for the year was 28 percent (25) of revenues. In absolute terms net working capital amounted to SEK 20,355 million (25,027) at the end of the year. In terms of volume, net working capital decreased by SEK -2,055 million (447) compared with the preceding year. Changed currency rates decreased net working capital by SEK -2,486 million (869) compared with the preceding year. The structural effect from acquisitions and divestments decreased working capital by SEK -132 million (264).
Cash flow from operating activities decreased to SEK 15,347 million
| Earnings and return | 2019 | 2020 |
|---|---|---|
| Operating profit, MSEK | 13,182 | 11,184 |
| as a % of revenue | 12.7 | 12.9 |
| Adjusted operating profit, MSEK | 19,015 | 14,531 |
| as a % of revenue | 18.4 | 16.8 |
| Profit after net financial items, MSEK | 11,945 | 11,238 |
| as a % of revenue | 11.5 | 13.0 |
| Return on capital employed, % | 15.0 | 13.3 |
| Return on total equity, % | 13.9 | 13.6 |
| Basic earnings per share, SEK | 6.81 | 6.96 |
| Diluted earnings per share, SEK | 6.79 | 6.95 |
| Whereof continuing operations | ||
| Operating profit, MSEK | 13,386 | 11,216 |
| as a % of revenue | 13.0 | 13.0 |
| Adjusted operating profit | 19,219 | 14,563 |
| as a % of revenue | 18.6 | 16.9 |
| Profit after net financial items, MSEK | 12,150 | 11,270 |
| as a % of revenue | 11.8 | 13.0 |
| Basic earnings per share, SEK | 6.97 | 6.99 |
| Capital expenditure, Group total | 2019 | 2020 |
| Investments in non-current assets, MSEK | 4,147 | 3,278 |
(16,894). Net cash flow after investing activities was SEK 10,571 million (11,703). At the end of the year, cash and cash equivalents amounted to SEK 23,752 million (16,987). Interest-bearing liabilities, including net pension liabilities, less cash and cash equivalents, yielded a net debt of SEK 2,646 million (11,131). The net debt to equity ratio was 0.04 (0.18). Sandvik's revolving credit facility of SEK 9,000 million was unutilized at year-end. Under the Swedish bond program, totaling SEK 15,000 million, bonds corresponding to a nominal amount of SEK 2,650 million were outstanding at year-end. Under the European bond program, totaling EUR 3,000 million, a nominal amount of EUR 1,103 million was outstanding at year-end. The remaining maturity of bonds averaged 1.0 years for Swedish bonds and 5.5 years for European bonds. At year-end, the international credit rating agency Standard & Poor's had a rating of A- for Sandvik's long-term borrowings, and A-2 for Sandvik's short-term borrowings.
Equity at year-end amounted to SEK 65,082 million (61,858), or SEK 51.9 per share (49.3). The equity ratio was 55 percent (51).
Investments in tangible and intangible assets for the full year 2020 amounted to SEK 3,197 million (4,136) corresponding to 80 percent of scheduled depreciation for continuing operations. Proceeds from sale of companies and shares, net of cash, amounted to SEK 778 million (95). Acquisition of companies and shares, net of cash, amounted to SEK 3,274 million (1,870). Investments in internally generated intangible assets were SEK 405 million (533).
On January 14, Sandvik announced the completion of the acquisition of the US-based privately owned Summerill Tube Corporation, a manufacturer of high precision tubes for industries such as aerospace, transportation and petrochemical. In
2018, it generated revenues of about SEK 100 million.
On March 12, Sandvik completed the divestment of Sandvik Drilling and Completions (Varel), the operations relating to the oil and gas industry, to the private equity firm Blue Water Energy and the privately owned Nixon Energy Investments. Sandvik will remain a minority owner of 30 percent of the company and hold a position on the board.
On June 1, Sandvik completed the acquisition of Quimmco Centro Tecnológico (QCT), a privately owned Mexican company offering integral machining solutions. In 2019, QCT's cutting tools division generated SEK 90 million and had 130 employees.
On July 15, Sandvik divested a 10 percent minority interest in Xiamen Golden Egret Special Alloy Co., Ltd. (Gesac), a Chinese joint venture orginally formed in 2005 to secure the supply of tungsten. The minority holding was divested to Xiamen Tungsten Co, the majority owner of Gesac.
On October 2, Sandvik acquired the remaining 79 percent of Allied Construction Products LLC (Allied), a US distributor of hydraulic hammers to the construction and mining industries and manufacturer of compactor plates and mounting brackets. In 2019, Allied generated USD 29 million in revenues with 38 employees. Sandvik was already a 21 percent minority shareholder and Sandvik products generated about 80 percent of Allied's revenues.
On October 9, Sandvik announced a signed agreement to divest its Exploration business to Drillman. Drillman is a subsidiary of the M Group of companies. In 2019, Exploration had revenues of SEK 450 million.
On October 19, Sandvik signed an agreement to acquire US-based CGTech, a global market leader in software for numerical control (NC/ CNC) simulation, verification and optimization software. CGTech had about 180 employees and a revenue of SEK 470 million in 2019. The acquisition was completed on December 31.
On December 23, Sandvik completed the acquisition of the Indian company Miranda Tools, a manufacturer of high speed steel and solid carbide round tools. In 2019, Miranda Tools had revenues of about SEK 200 million and around 580 employees.
On December 24, Sandvik signed an agreement to acquire DSI Underground, the global leader in ground support and reinforcement products, systems and solutions for the underground mining and tunneling industries. DSI Underground has approximately 2,000 employees and the 2020 revenue is expected to be about EUR 518 million (excluding four joint ventures that are part of the acquisition).
On December 30, Sandvik acquired a minority stake in the privately owned American software company Oqton, a leading provider of AI-powered manufacturing solutions that allows manufacturers to manage, optimize, and automate their manufacturing workflows.
Goodwill attributable to the Sandvik Mining and Rock Technology business area amounting to SEK 304 million was written down in the second quarter due to an expected closure of smaller business. The cost is booked in Other operating income and expenses. The impairment testing of goodwill performed during 2020 did not indicate any other impairment requirements. See note G13 for details.
Sandvik has received various forms of government grants in different countries where the Group operates. The grants have been recognized as a reduced cost to which the grant is attributable to. The main part is related to personnel costs, however no government grants related to reduced work hours have been received in our Swedish entities for the fourth quarter. See note G33 for more details.
As of December 31, there is no significant impact on the valuation of inventory related to the Covid-19 pandemic, see note G18.
As of December 31, expected credit losses remain on a low level compared to twelve months rolling revenues. There are no indications of any significant impact related to the Covid-19 pandemic, see note G19.
The Parent Company's revenues for 2020 amounted to SEK 9,599 million (21,038) and the operating result was SEK 2,950 million (4,224). Result from shares in group companies of SEK -1,558 million (11,989) for the year consists primarily of costs related to the separation of Sandvik Materials Technology from the commissionaire structure, partially set off by dividends. Interest-bearing liabilities, minus cash and cash equivalents and interest-bearing assets, amounted to SEK 7,057 million (15,601). The Parent Company's total assets decreased by SEK -12,462 million, from SEK 76,797 million to SEK 64,335 million. Investments in non-current assets amounted to SEK 430 million (976).
The number of employees in the Parent Company and the subsidiaries operating on commission for Sandvik AB as of December 31, 2020 was 3,354 (6,627).
The Board of Directors proposes an ordinary dividend of SEK 4.50 per share (0). In addition, the Board proposes an extra dividend of SEK 2.00. The dividend proposal represents 75 percent (0) of adjusted EPS for the Sandvik Group in total.
Dividend 6.50 per share × number of shares 1,254,385,923 =8,153,508,500 Profit carried forward 26,461,788,059 Total, SEK 34,615,296,559
The average number of employees amounted to 38,666 (41,120), of which 19 percent (19) were women. The employee turnover rate was 8 percent (10). Wages, salaries and other remunerations for the year totaled SEK 18,864 million (21,770).
The guidelines for the remuneration of senior executives adopted by the 2020 Annual General Meeting are set out below. The Board of Directors does not propose any new guidelines.
These guidelines encompass the President and other members of the Group Executive Management. The guidelines do not apply to any remuneration decided on or approved by the General Meeting.
A prerequisite for the successful implementation of the Company's business strategy and safeguarding of its long-term interests, including its sustainability, is that the Company is able to recruit and retain qualified personnel. To this end, it is necessary that the Company offers competitive remuneration. These guidelines enable the Company to offer senior executives a competitive total remuneration. For more information regarding the Company's business and sustainability strategy, please see the Company's website: home. sandvik.
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 remuneration may consist of fixed salary, variable remuneration, pension benefits and other benefits.
The purpose of the fixed salary is to attract and retain senior executives with the right competence for the respective positions. The salary level should be determined by comparing the salary to similarly complex positions within a defined peer group.
– Variable share related remuneration
The Company may offer long-term share related or share price related remuneration. Such programs are adopted by the General Meeting and are therefore not covered by these guidelines. There are currently ongoing long-term share related incentive programs for senior executives and key employees in the Group. For more information on these programs, see the Company's website: home.sandvik.
| Financial position | 2019 | 2020 | Quarterly trend of revenue and profit after financial items | ||||
|---|---|---|---|---|---|---|---|
| Cash flow from operating activities, MSEK | 16,894 | 15,347 | Profit after | Net | |||
| Cash flow after investing activities, MSEK | 11,703 | 10,571 | MSEK | Revenue | financial items | margin,% | |
| Cash and cash equivalents and short-term | 2019 | Q1 | 25,180 | 4,145 | 16 | ||
| investments as of December 31, MSEK | 16,987 | 23,752 | Q2 | 26,567 | 4,625 | 17 | |
| Net debt as of December 31, MSEK | 11,131 | 2,646 | Q3 | 25,188 | 2,765 | 11 | |
| Net financial items, MSEK | -1,238 | 54 | Q4 | 26,598 | 409 | 2 | |
| Equity ratio, % | 51 | 55 | 2020 | Q1 | 23,623 | 2,334 | 10 |
| Net debt/equity ratio, times | 0.18 | 0.04 | Q2 | 20,229 | 1,524 | 8 | |
| Equity as of December 31, MSEK | 61,858 | 65,082 | Q3 | 20,146 | 3,986 | 20 | |
| Equity per share as of December 31, SEK | 49.3 | 51.9 | Q4 | 22,412 | 3,394 | 15 |
1) The Parent Company includes subsidiaries operating on commission for Sandvik AB. These are presented in note P12.
Variable cash remuneration shall be conditional upon the fulfillment of defined and measurable criteria. These criteria shall aim at promoting the Company's business strategy and performance as well as its long-term interests, including its sustainability. At the beginning of each year the Board of Directors and the Remuneration Committee shall establish the criteria, including key performance indicators (KPIs) and the target ranges, deemed relevant for the upcoming measurement period. The criteria may be financial, with at least three KPIs, and non-financial, and shall always be related to business performance. At least 80 percent of the variable cash remuneration shall be linked to the financial criteria. The President and Group Function heads shall be measured on Group level KPIs and the Business Area Presidents shall be measured on both Group level and Business Area level KPIs. The established KPIs shall be presented on the Company's website: home.sandvik. The extent to which the criteria for awarding variable cash remuneration have been fulfilled shall be determined when the measurement period has ended and will be published in the Report on Evaluation of Remuneration the following year. For financial criteria, the evaluation shall be based on the latest financial information made public by the Company.
In specific cases, the Company may offer one-off remuneration provided that such remuneration is only made on an individual basis, for the purpose of recruiting or retaining senior executives, does not exceed an amount corresponding to 100 percent of the individual's fixed annual salary and maximum variable cash remuneration, and is not paid more than once per year and individual.
Terms and conditions for variable remuneration shall be designed so that the Board of Directors (i) has the right to limit or refrain from payment of variable remuneration if exceptional economic circumstances prevail and such a measure is considered reasonable, and (ii) has the right to withhold or reclaim variable remuneration paid to an executive based on results that afterwards were found to have been misstated because of wrongdoing or malpractice (so called malus and clawback).
For the President, the pension benefit shall be defined contribution and the pension premiums shall amount to not more than 37.5 percent of the fixed annual salary. For the other senior executives, pension benefits shall be defined contribution and amount to not more than 55 percent of the fixed annual salary, in accordance with the Swedish ITP1 pension scheme. Exceptions to this main rule may be decided on for senior executives with existing defined benefit schemes provided that the cost of such schemes does not exceed the above mentioned cap.
Other benefits may include, for example, life insurance, medical insurance and company car benefit. Such benefits may amount to not more than 5 percent of the fixed annual salary. For senior executives in need of double accommodation, paid accommodation, etc. may be added in line with Sandvik's regulations and such benefits may amount to not more than 20 percent of the fixed annual salary.
Severance pay may be paid when employment is terminated by Sandvik. The President and the other senior executives may have a period of notice of not more than 12 months, in combination with severance pay corresponding to 6–12 months fixed salary. When employment is terminated by the senior executive, the notice period may not exceed six
months and no severance pay shall be paid.
In case a senior executive is not entitled to severance pay, but is covered by a non-compete undertaking, the senior executive may instead be compensated for such a non-compete undertaking. Any remuneration paid as compensation for a non-compete undertaking shall not exceed 60 percent of the fixed salary at the time of notice of termination of the employment and shall not be paid for a longer period than 18 months. Fixed salary during the notice period together with any compensation for the non-compete undertaking shall not exceed an amount equivalent to the senior executive's fixed salary for 24 months.
When preparing the proposal for these guidelines, the employment conditions applied within the Company as a whole have been used as a benchmark, following the principle that the remuneration packages of all Sandvik employees should be based on the complexity of the position, performance and market practice. In general, the same combination of remuneration components such as fixed salary, variable remuneration, pension and other benefits are offered within Sandvik.
The Board of Directors has established a Remuneration Committee. The Committee's tasks include preparing the Board of Directors' decision to propose guidelines for senior executive remuneration. The Board of Directors shall prepare a proposal for guidelines at least every fourth year and submit it to the General Meeting. The guidelines shall be in force until new guidelines are adopted by the General Meeting. The Remuneration Committee shall also monitor and evaluate programs for variable remuneration for the executive management, the application of the guidelines for senior executive remuneration as well as the current remuneration structures and
compensation levels in the Company. The members of the Remuneration Committee are independent of the Company and its executive management. The President and the other senior executives do not participate in the Board of Directors' processing of and resolutions regarding remuneration-related matters to the extent that they are affected by such matters.
Decisions on remuneration to the President are taken by the Board of Directors, based on proposals from the Remuneration Committee, and decisions on remuneration to the other senior executives are taken by the Remuneration Committee.
Remuneration under employments subject to other rules than Swedish may be duly adjusted to comply with mandatory rules or established local practice, taking into account, to the extent possible, the overall purpose of these guidelines.
The Board of Directors may temporarily resolve to derogate from the guidelines, in whole or in part, if in a specific case there is special cause for the derogation and a derogation is necessary to serve the Company's long-term interests, including its sustainability, or to ensure the Company's financial viability. As set out above, the Remuneration Committee's tasks include preparing the Board of Directors' resolutions in remuneration-related matters. This includes any resolutions to derogate from the guidelines.
For information concerning the current remuneration of senior executives, including ongoing long-term incentive programs, refer to note G4.
Each business area is responsible for its own R&D activities. Focus areas are machining materials and process development, additive manufacturing, alloys, powder metallurgy, electrification and digital solutions.
Sandvik has a portfolio of approximately 5,977 (6,060) active patents. In 2020, 853 (964) new patents were granted. Investments in R&D were SEK 3,429 million (3,674), corresponding to 4.0 percent (3.7) of revenues. The number of employees in R&D, including Quality Assurance, was 2,534 (2,740).
Sandvik is a multinational group with many intercompany transactions. The OECD has issued guidelines for transfer pricing of cross-border transactions in multinational groups. Sandvik adheres to these guidelines and also to the local legislation of each country to ensure that a correct pricing model is deployed and that a correct amount of tax is paid in each country. Sandvik monitors the OECD's tax reform work and the EU initiatives on tax transparency carefully and observes these standards as and when enacted. Sandvik strives to have good relations with our stakeholders, such as tax authorities, non-governmental organizations and investors.
Sandvik has initiated cooperation with tax authorities in several countries. We are convinced that an open discussion and cooperation with tax authorities around the globe will help us to reduce uncertainty about the taxes we are obliged to pay. We contribute to the local communities and countries in which we operate in the form of, for example, taxes and employment opportunities. In
2020, the Group paid SEK 3,518 million (3,598) in income taxes globally. Income tax comprises just a portion of all taxes paid by Sandvik worldwide. In addition, we pay social security contributions, environmental and energy taxes, property taxes, etc. Furthermore, Sandvik collects and pays taxes at the request of governments and authorities, including indirect taxes and withholding taxes.
In Sweden, Sandvik conducts licensed operations at nine plants. All of them hold a requisite environmental permit. A number of guideline values were exceeded for emissions to air and water, and on one occasion, emission limit values to water were exceeded. In all these occurences corrective actions were taken to comply with the target values. One environmental permit needs renewal in 2021.
Sandvik has, in accordance with the Annual Accounts Act, prepared a statutory sustainability report, approved for issue by the Board of Directors and the President and CEO. The Statutory Sustainability report and Sustainable Business Report comprise pages 2–3, 9–11, 54–60 and 129–140.
On January 1, 2021, a new business area, Sandvik Rock Processing Solutions, was established, formed out of the former Crushing and Screening division. The remaining operations within Sandvik Mining and Rock Technology changed their name to Sandvik Mining and Rock Solutions.
Change,
Change,
In 2020, Sandvik's operations consisted of three business areas: Sandvik Mining and Rock Technology, Sandvik Manufacturing and Machining Solutions, and Sandvik Materials Technology.
| Change, | Change, | |||
|---|---|---|---|---|
| MSEK | 2019 | 2020 | % | %1) |
| SMRT | 44,379 | 41,403 | -7 | -1 |
| SMM | 41,163 | 32,677 | -21 | -18 |
| SMT | 16,475 | 11,910 | -28 | -27 |
| Other operations | 2,059 | 297 | -86 | -5 |
| Group activities | 0 | 0 | n/m | n/m |
| Continuing operations | 104,075 | 86,287 | -17 | -12 |
| Discontinued operations | 71 | 1 | -98 | n/m |
| Group total | 104,147 | 86,288 | -17 | -12 |
MSEK 2019 2020
Revenue by business area
| MSEK | 2019 | 2020 | % | %1) |
|---|---|---|---|---|
| SMRT | 44,777 | 40,032 | -11 | -5 |
| SMM | 41,123 | 32,477 | -21 | -19 |
| SMT | 15,279 | 13,598 | -11 | -10 |
| Other operations | 2,059 | 297 | -86 | -5 |
| Group activities | 0 | 0 | n/m | n/m |
| Continuing operations | 103,238 | 86,404 | -16 | -11 |
| Discontinued operations | 295 | 6 | -98 | -98 |
| Group total | 103,533 | 86,409 | -17 | -11 |
1) Change compared with the preceding year, at fixed exchange rates for comparable units.
1) Change compared with the preceding year, at fixed exchange rates for comparable units.
| MSEK | 2019 | % of revenue | 2020 | % of revenue | Change, % | Change, %1) |
|---|---|---|---|---|---|---|
| SMRT | 8,602 | 19 | 7,389 | 18 | -14 | -3 |
| SMM | 8,380 | 20 | 4,606 | 14 | -45 | -33 |
| SMT | 1,444 | 9 | 492 | 4 | -66 | -39 |
| Other operations | -4,263 | n/m | -578 | n/m | -86 | -43 |
| Group activities | -776 | n/m | -694 | n/m | -11 | -41 |
| Continuing operations | 13,386 | 13 | 11,216 | 13 | -16 | -19 |
| Discontinued operations | -204 | -69 | -32 | n/m | -84 | -82 |
| Group total | 13,182 | 13 | 11,184 | 13 | -15 | -18 |
1) Change compared with the preceding year, at fixed exchange rates for comparable units adjusted for items affecting comparability. n/m=non meaningful.
Sandvik Mining and Rock Technology is a leading supplier of equipment and tools, service and technical solutions for the mining industry and rock excavation within the construction industry. Order intake for the business area amounted to SEK 41,403 million (44,379), a decrease of -1 percent at fixed exchange rates for comparable units. Revenue totaled SEK 40,032 million (44,777), down -5 percent at fixed exchange rates for comparable units. The operating margin was 18.5 percent (19.2) of revenues and the adjusted operating margin was 19.8 percent (19.9) of revenues. The items affecting comparability of SEK -533 million (-309) were predominantly related to efficiency measures to ensure cost efficiency. Effects from the Covid-19 pandemic: Production was impacted only to a minor extent during the year, and both supply and distribution proceeded as planned. During
Sandvik Manufacturing and Machining Solutions is a market-leading manufacturer of tools and tooling systems for advanced industrial metal cutting, expanding into digital and additive manufacturing. Order intake for the business area amounted to SEK 32,677 million (41,163), a decrease of -18 percent at fixed exchange rates for comparable units. Revenue totaled SEK 32,477 million (41,123), down -19 percent at fixed exchange rates for comparable units. The operating margin was 14.2 percent (20.4) of revenues and the adjusted operating margin was 18.8 percent (22.6) of revenues. The items affecting comparability of SEK -1,494 million (-930) were related to efficiency measures to mitigate a slower demand environment and to ensure optimized efficiency. Effects from the Covid-19 pandemic: The business area had a sharp drop in demand in the beginning of the second quarter, with large customer segments impacted by production stops and lower business activity.
the second quarter there was a temporary negative impact on demand due to limited access to mines but there was a recovery during the second half of the year.
| Financial overview, MSEK | 2018 | 2019 | 2020 |
|---|---|---|---|
| Order intake | 41,842 | 44,379 | 41,403 |
| Revenue | 41,058 | 44,777 | 40,032 |
| Operating profit | 7,452 | 8,602 | 7,389 |
| Operating margin, % | 18.2 | 19.2 | 18.5 |
| Adjusted operating profit1) | 7,542 | 8,911 | 7,923 |
| Adjusted operating margin, % | 18.4 | 19.9 | 19.8 |
| Return on capital employed, % | 33.9 | 32.3 | 28.0 |
| Number of employees2) | 14,397 | 14,223 | 14,178 |
1) Operating profit adjusted for items affecting comparability of SEK -90 million in 2018, of SEK -309 million in 2019 and of SEK -533 million in 2020.
2) Full-time equivalent.
After the second quarter, the demand had a steady recovery for automotive and general engineering, especially in the fourth quarter. However, the Covid-19 pandemic continued to weigh heavily on demand in aerospace and the oil and gas segments.
| Financial overview, MSEK | 2018 | 2019 | 2020 |
|---|---|---|---|
| Order intake | 41,094 | 41,163 | 32,677 |
| Revenue | 40,757 | 41,123 | 32,477 |
| Operating profit | 9,922 | 8,380 | 4,606 |
| Operating margin, % | 24.3 | 20.4 | 14.2 |
| Adjusted operating profit1⁾ | 10,361 | 9,310 | 6,100 |
| Adjusted operating margin, % | 25.4 | 22.6 | 18.8 |
| Return on capital employed, % | 36.8 | 25.9 | 14.6 |
| Number of employees2⁾ | 19,549 | 18,530 | 17,301 |
1) Operating profit adjusted for items affecting comparability of SEK -439 million in 2018, of SEK -930 million in 2019 and of SEK -1,494 million in 2020.
2) Full-time equivalent.
Sandvik Materials Technology is a world-leading developer and manufacturer of high value-added products in advanced stainless steels, powder-based alloys and special alloys for the most demanding industries, as well as products for industrial heating and medical wire. Order intake for the business area amounted to SEK 11,910 million (16,475), a decrease of -27 percent at fixed exchange rates for comparable units. Revenue totaled SEK 13,598 million (15,279), down -10 percent at fixed exchange rates for comparable units. The operating margin was 3.6 percent (9.4) of revenues and the adjusted operating margin was 7.6 percent (11.7) of revenues. The items affecting comparability of SEK -540 million (-343) were related to efficiency measures to mitigate a slower demand environment as well as separation costs. Production during the year was largely unaffected by the Covid-19 pandemic, although there were some temporary shutdowns in the second quarter. Supply and distribution chains remained largely intact. However, the market weakness remains high in the oil & gas and aerospace segments.
| Financial overview, MSEK | 2018 | 2019 | 2020 |
|---|---|---|---|
| Order intake | 15,898 | 16,475 | 11,910 |
| Revenue | 14,697 | 15,279 | 13,598 |
| Operating profit | 1,307 | 1,444 | 492 |
| Operating margin, % | 8.9 | 9.4 | 3.6 |
| Adjusted operating profit1) | 1,331 | 1,787 | 1,032 |
| Adjusted operating margin, % | 9.1 | 11.7 | 7.6 |
| Return on capital employed, % | 10.1 | 11.0 | 3.9 |
| Number of employees2) | 5,931 | 5,744 | 5,084 |
1) Operating profit adjusted for items affecting comparability of SEK 1,074 million in 2018, of SEK 1,513 million in 2019 and of SEK -540 million in 2020. In 2020, adjusted operating profit, excluding metal price effects totaling SEK 1,205 million (1,513 for 2019 and 1,074 for 2018). The adjusted underlying operating margin was 8.9 percent (9.9 for 2019 and 7.3 for 2018).
2) Full-time equivalent.
After the divestment of Sandvik Drilling and Completions (Varel) in March 2020 there were no active operations in Other operations during the last three quarters. Varel was a global supplier of drilling solutions focusing on drill bits and downhole products for well construction and well completion. In 2018, Other operations comprised of Varel and Sandvik Hyperion; Sandvik Hyperion was divested in July 2018. Order intake for Other operations amounted to SEK 297 million (2,059), a decrease of -5 percent at fixed exchange rates for comparable units. Revenue totaled SEK 297 million (2,059), down -5 percent at fixed exchange rates for comparable units. The operating margin was -194.9 percent (-207.0) of revenues and the adjusted operating margin was -10.4 percent (-6.8) of revenues. The items affecting comparability of SEK -547 million (-4,123) were related to the divestment of Varel in March 2020.
| Financial overview, MSEK | 2018 | 2019 | 2020 |
|---|---|---|---|
| Order intake | 3,605 | 2,059 | 297 |
| Revenue | 3,560 | 2,059 | 297 |
| Operating profit | 659 | -4,263 | -578 |
| Operating margin, % | 18.5 | 207.0 | 194.9 |
| Adjusted operating profit1) | 41 | -140 | -31 |
| Adjusted operating margin, % | 1.1 | -6.8 | -10.4 |
| Return on capital employed, % | 10.3 | n/m | n/m |
| Number of employees2) | 1,089 | 1,081 | 0 |
1) Operating profit adjusted for items affecting comparability of SEK +618 million in 2018, SEK -4,123 million in 2019 and SEK -547 million in 2020.
2) Full-time equivalent.
| Items affecting comparability, MSEK | 2018 | 2019 | 2020 |
|---|---|---|---|
| Sandvik Mining and Rock Technology | -90 | -309 | -533 |
| Sandvik Manufacturing and Machining Solutions |
-439 | -930 | -1,494 |
| Sandvik Materials Technology | -24 | -343 | -540 |
| Other operations | 618 | -4,123 | -547 |
| Group activities | 0 | -127 | -233 |
| Group total | 65 | -5,832 | -3,347 |
1) Primarily related to savings measures during 2018–2020. 2) Related to savings measures during 2018–2020.
3) 2018: related to a capital loss upon exit from joint venture;
2019: related to savings measures and the internal separation of Sandvik Materials Technology; 2020: related to savings measures and the internal separation of Sandvik Materials Technology.
4) 2018: related to capital gain from divestment of Hyperion; 2019: mainly related to a goodwill impairment upon divestment of Varel; 2020: primarly due to negative impact related to the realized effect from reversal of the accumulated currency translation in 'Other comprehensive income' due to the divestment of Varel.
5) Related to internal separation of Sandvik Materials Technology and savings measures during 2019–2020.
Sandvik AB has its head office in Stockholm and is the Parent Company of the Sandvik Group, with subsidiaries in about 70 countries. The Group has about 37,000 employees and revenues in more than 160 countries. Sandvik AB is a public company with its shares listed on Nasdaq Stockholm.
Corporate governance within Sandvik is based on external rules such as the Swedish Companies Act, the Nordic Main Market Rulebook for Issuers, the Swedish Code of Corporate Governance (the "Code") and other relevant laws and regulations. The Code is available at corporategovernanceboard.se. In 2020, Sandvik applied the Code without deviating from any of its regulations.
Sandvik's corporate governance framework, The Sandvik Way, implements the external rules mentioned above and also sets out the internal rules and principles for governance that apply specifically within Sandvik. It is based on four building blocks, as set forth in the model below, and
describes how common ways of working have been implemented throughout the entire organization.
This part outlines how the Group is led and governed from the top. The Board of Directors, elected at the Shareholders' Meeting, sets the strategic direction for the Group. The President carries this out through the Group Executive Management whose members manage and oversee the operations of the Group. The main operational responsibility in the Group lies with the business areas and divisions, with Group functions responsible for functional policies and processes supporting the business. This part is the main focus of this Corporate Governance Report.
This building block sets the foundation for how we all shape our culture in the company and enable a customer oriented and responsible business. Our operational controls and risk frameworks are underpinned by the ambitions and requirements of our purpose, core values (Customer Focus, Innovation, Fair Play and Passion to Win), Code of Conduct and leadership principles.
The detailed controls and risk frameworks common across the Group are detailed in the operational system. This includes many aspects from planning and forecasting, policies, procedures and controls to compliance, monitoring and audit. The
operational system represents the day-to-day controls that directly impact the work of our employees. As such, it is subject to regular review and continuous improvement.
The final building block in the framework comprises the systems of business area governance, each reflecting the independent challenges and opportunities each business faces in its own industry sector. Customers, business cycles, supply chain and industry risk all vary across the business areas and call for controls and management systems tailored to the business, further complementing the group-wide way of working detailed in the other building blocks. Business area governance is adopted by each business area within the overall framework of The Sandvik Way and may include specific rules and procedures for each business area, division, business unit as well as other relevant parts of the operational business structure.
As of December 31, 2020 Sandvik's share capital amounted to SEK 1,505,263,107.60 represented by 1,254,385,923 shares. According to the share register, Sandvik had about 106,000 shareholders as of December 31, 2020 and AB Industrivärden was the largest owner with about 12.5 percent of the share capital. Of the total share capital at year-end, about
43 percent was owned by investors outside Sweden.
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 their attendance within the time limit stated in the notice of the General 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 General Meeting.
All shares in Sandvik carry equal voting rights with one vote per share.
Shareholders representing 56.2 percent of the share capital and votes attended the Annual General Meeting held on April 28, 2020 in Sandviken, Sweden. Due to the Covid-19 pandemic, shareholders participated mainly through proxy or advance voting. Sven Unger, attorney-at-law, was elected to chair the meeting.
| December 31, 2020, % | |
|---|---|
| AB Industrivärden | 12.5 |
| Alecta Pension Insurance | 5.1 |
| Swedbank Robur Funds | 3.4 |
| BlackRock | 2.9 |
| Vanguard | 2.6 |
| Lundbergföretagen AB | 2.4 |
| AMF Pension and Funds | 2.3 |
| SEB Funds | 2.2 |
| Norges Bank | 1.7 |
| Handelsbanken Funds | 1.5 |
Source: Monitor by Modular Finance AB
Resolutions passed at the General Meeting included the following:
For additional information about the Annual General Meeting, including the minutes, refer to: home.sandvik.
The next Annual General Meeting will be held on April 27, 2021. More information is available at: home.sandvik.
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, which includes a procedure for appointing the Nomination Committee, valid until
a General Meeting resolves a change. In accordance with this instruction, the Nomination Committee shall consist of members appointed by each 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 2021 Annual General Meeting, the Nomination Committee consists of Fredrik Lundberg, Chairman (Industrivärden), Ann Grevelius (Alecta), Marianne Nilsson (Swedbank Robur Funds), Lars Pettersson (Lundbergs) and Johan Molin (Sandvik's Chairman of the Board).
Up to the date of this Annual Report, the Nomination Committee met on three occasions. The Nomination Committee was informed of the results of the Board's own evaluation. The Committee met with the President and CEO that presented the Company's strategy. The Nomination Committee discussed the general criteria that Board members should fulfill, including the independence requirement, and reviewed the number of Board assignments that each Board member has in other companies. The Nomination Committee applied rule 4.1 of the Code as the diversity policy. This rule states that the Board shall have an appropriate composition in view of the company's operations, phase of development and other relevant circumstances,
display diversity and breadth in terms of qualifications, experience and background of the Board members elected by the General Meeting and that the company shall strive for gender balance.
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 satisfactory 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 the Board's Procedural Guidelines which 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, significant acquisitions and 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.
As of December 31, 2020 Sandvik's Board consisted of eight members elected by the Annual General Meeting. The Nomination Committee communicated before the 2020 Annual General Meeting that the Nomination Committee had applied rule 4.1 of the Code as the diversity policy. The current Board composition is the result of the work of the Nomination Committee prior to that General Meeting. The Board consists of members with experience from different geographic areas and different industry sectors and, excluding the President, 43 percent of the Board members elected by the General Meeting are women.
Pursuant to Swedish legislation, trade unions are entitled to representation on the Board and they have appointed two members and two deputies (one of which left his position as deputy on December 15, 2020).
The Board members are presented on pages 50–51.
Marika Fredriksson and Helena Stjernholm are not regarded as independent in relation to major shareholders in the company and Stefan Widing is not regarded as independent in relation to the company and its executive management. The other five Board members elected by the General Meeting are all 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 independence requirements of the Code.
During the year, the Board held 13 meetings. The President presented his 100-day plan after joining the company and started a strategy review. The Presidents of all business areas presented their goals and strategies.
| Audit | Remuneration | Acquisitions and Divestitures |
||
|---|---|---|---|---|
| Member | Board | Committee | Committee | Committee |
| Total number of meetings | 13 | 5 | 2 | 8 |
| Jennifer Allerton | 13 | |||
| Thomas Andersson | 13 | |||
| Claes Boustedt | 13 | 5 | 8 | |
| Marika Fredriksson | 12 | |||
| Johan Karlström | 12 | 2 | ||
| Tomas Kärnström | 13 | |||
| Thomas Lilja | 13 | |||
| Mats W Lundberg1) | 13 | |||
| Johan Molin2) | 13 | 3 | 2 | 8 |
| Björn Rosengren3) | 1 | |||
| Helena Stjernholm | 13 | 5 | 2 | 8 |
| Lars Westerberg4) | 7 | 2 | ||
| Stefan Widing5) | 12 | |||
| Kai Wärn 6) | 6 |
1) Resigned as deputy employee representative as of December 15, 2020.
2) Replaced Lars Westerberg as member of the Audit Committee as of April 28, 2020.
3) Resigned as President and CEO as well as Board member as of February 1, 2020.
4) Resigned as Board member at the 2020 Annual General Meeting and thereby also as member of the Audit Committee.
5) Appointed President and CEO as of February 1, 2020 and participated at Board meetings solely in this function before being elected Board member at the 2020 Annual General Meeting. 6) Elected Board member at the 2020 Annual General Meeting.
| Name | Function | Independent in acc. with the Code |
Shareholding, number1) Dec 31, 2020 |
Elected | Audit Committee |
Remuneration Committee |
Acquisitions and Divestitures Committee |
|---|---|---|---|---|---|---|---|
| Jennifer Allerton | Member | Yes | 10,000 | 2015 | |||
| Thomas Andersson | Deputy2) | 0 | 2012 | ||||
| Claes Boustedt | Member | Yes | 20,0003) | 2015 | Chairman | Member | |
| Marika Fredriksson | Member | No4) | 2,500 | 2017 | |||
| Johan Karlström | Member | Yes | 5,000 | 2011 | Member | ||
| Tomas Kärnström | Member2) | 2,889 | 2006 | ||||
| Thomas Lilja | Member2) | 4,840 | 2016 | ||||
| Johan Molin | Chairman | Yes | 260,0005) | 2015 | Member | Chairman | Chairman |
| Helena Stjernholm | Member | No4) | 5,000 | 2016 | Member | Member | Member |
| Stefan Widing | Member | No4) | 43,152 | 2020 | |||
| Kai Wärn | Member | Yes | 12,000 | 2020 |
1) Pertains to own and closely related persons' shareholdings in Sandvik AB.
2) Employee representatives (both members and deputy members participate in Board meetings). Thomas Lilja (member) represents Unionen/ Ledarna/Swedish Association of Graduate Engineers. Tomas Kärnström (member) and Thomas Andersson (deputy) represent IF Metall. 3) In addition 10,000 shares were acquired on January 29, 2021.
4) Marika Fredriksson and Helena Stjernholm are not regarded as independent in relation to major shareholders in the company and Stefan Widing is not regarded as independent in relation to the company and its executive management.
5) In addition 1,000,000 call options in Sandvik AB.
The Board also reviewed the strategies and results from a number of the divisions. The Board received regular updates on the impact of the Covid-19 pandemic on the business and took some strategic decisions based thereon. The Board addressed matters related to the overall Group strategy, long-term financial and sustainability targets, IT, risk management, human resources, such as incentive programs, environment, health and safety, and issues concerning investments and operational restructuring and reviewed previously made investments. Further, the Board handled matters with respect to acquisitions and divestments, such as the decision to proceed with the process to separate the Sandvik Materials Technology (SMT) business area with the target to distribute SMT to the shareholders and separately list it, the acquisition of CGTech and the signing of the acquisition of DSI Underground. The Remuneration Committee, Audit Committee and the Acquisitions and Divestitures Committee reported from their respective meetings. In respect of the Audit Committee, reported matters included accounting principles, financial outcome, ERM, compliance, Speak Up and Code of Conduct, internal control and internal audit as well as the result of the external audit. The Committees also submitted matters for resolution by the Board and the minutes and reports from these meetings were made available to the Board members. In September 2020, the Board visited Sandvik's operations in Gimo and Fagersta, taking specific precautions due to the Covid-19 restrictions.
As resolved at the 2020 Annual General Meeting, the fee to the Chairman of the Board is SEK 2,550,000 and the fee to each of the non-executive Board members elected by the General Meeting is SEK 690,000.
In addition, SEK 300,000 was paid to the Chairman of the Audit Committee and SEK 170,000 to each of the other Committee members, in total SEK 640,000. The Chairman of the Remuneration Committee was paid
SEK 145,000 and each of the other Committee members SEK 115,000, in total SEK 375,000. No remuneration was paid to the members of the Acquisitions and Divestitures Committee.
For more detailed information on remuneration of the Board members, see note G4.
To ensure the quality of the work of the Board and to identify the possible need for further expertise and experience, the work of the Board and its members is evaluated annually. In 2020, the evaluation, which was led by the Chairman of the Board, was carried out by way of each Board member responding anonymously to an online questionnaire. The Chairman also held separate evaluation discussions with all Board members. The compiled results of the evaluations were presented to the Board as well as to 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.
During 2020 the members of the Remuneration Committee were Johan Molin (Chairman of the Committee), Johan Karlström and Helena Stjernholm. 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 the President, who in turn decides on the remuneration to be paid to the Group Executive Management in consultation with the Remuneration Committee.
For guidelines, remuneration and other benefits payable to the Group Executive Management, refer to the Guidelines for the remuneration of senior executives on pages 38–40 and note G4.
During 2020 the Remuneration Committee held two meetings.
As of the 2020 Annual General Meeting the members of the Audit Committee are Claes Boustedt (Chairman of the Committee), Johan Molin and Helena Stjernholm. Areas addressed by the Audit Committee mainly related to:
During 2020 the Audit Committee held five meetings at which Sandvik's external auditor and representatives of the company's management were present.
During 2020 the members of the Acquisitions and Divestitures Committee were Johan Molin (Chairman of the Committee), Claes Boustedt and Helena Stjernholm. The purpose of the Committee is to provide a better process for preparing major or strategically important acquisitions and divestitures for Board decisions. The Committee meets on an ad hoc basis, at the request of the President and CEO in consultation with the Chairman of the Board.
During 2020 the Acquisitions and Divestitures Committee held eight meetings and reviewed matters mostly related to the separation and potential distribution and listing of the Sandvik Materials Technology business area, the acquisitions of DSI Underground, CGTech, Miranda Tools' business, Allied Construction Products and QCT as well as the divestiture of Sandvik's Exploration business.
The President is accountable for Group decision-making in all areas delegated by the Board. In order to ensure a full Group perspective in these matters, the President has appointed the Group Executive Management as an advisory forum, focusing on how to achieve Group targets, strategies, structure and organization. The Group Executive Management meets each month and its members are accountable for implementing the President's decisions.
In 2020, the Group Executive Management consisted of:
of October 1, 2020 until December 31, 2020)
On January 1, 2021, Anders Svensson took on the position as President of the new business area Sandvik Rock Processing Solutions and joined the Group Executive Management.
The President and other members of the Group Executive Management are presented further on pages 52–53.
The Sandvik organizational model is based on a decentralized business model. As of January 1, 2021 there are four separate business areas – Sandvik Mining and Rock Solutions, Sandvik Manufacturing and Machining Solutions, Sandvik Materials Technology and Sandvik Rock Processing Solutions – each based on distinct product offerings. Each business area has full responsibility and accountability for its respective business results.
Sandvik Manufacturing and Machining Solutions is divided into two business area segments – Sandvik Machining Solutions and Sandvik Manufacturing Solutions. Further, each of the four business areas is organized in a number of divisions based on product offering or brand. The division is the highest operational level in the Sandvik organizational structure. Certain divisions that are based on a product offering are also divided into business units representing a defined part of the product offering.
For an overview of Sandvik's organizational model, refer to pages 2–3 and visit home.sandvik for more detailed information relating to the Group's business activities and product portfolios.
There are four Group functions within Sandvik: Communications, Finance, HR and Legal. Group functions specifically focus on setting the appropriate enabling structures and processes that are common for the Group or cover a specific area for which the Group is responsible.
At the 2020 Annual General Meeting, the audit firm Pricewaterhouse-Coopers AB was re-elected auditor of Sandvik AB for the period until the 2021 Annual General Meeting. Peter Nyllinge is the auditor-in-charge.
The auditor continuously audits and monitors the company's general accounting and the execution by the Board and the President of their respective responsibilities.
The progress of the audit is reported regularly during the year to the management teams of individual companies and the business areas, the Audit Committee and the Board. 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 guaranteed by the Audit Committee having determined the principles for allowing non-audit services to be provided by the auditor and, in some cases, pre-approving non-audit services.
Audit fees are paid continuously over the period in office on an approved current account basis. For detailed information on fees paid to the auditor, see note G5.
The Sandvik 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 provide an effective framework for describing and designing the internal control system implemented in the organization. The five components are Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring and Follow-up. The application of the COSO framework is described below.
Sandvik's Board of Directors is ultimately responsible for the governance of risk management including internal control over financial reporting.
Sandvik internal control over financial reporting forms an integral part of the operational system described in The Sandvik Way on page 43, which also includes risk assessments, policies, procedures and compliance.
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.
A Sandvik Financial Internal Control Framework has been developed and includes key components such as well-defined roles and responsibilities, internal control procedures and the risk and control matrix which defines a mandatory minimum of control activities that contribute to the mitigation of risks to acceptable levels. Internal control implementation has been completed in Group Functions and is continued in all business areas. 85 percent is expected to be completed in mid-2021 and the remaining 15 percent will be completed before mid-2022.
The Enterprise Risk Management (ERM) process at Sandvik includes the area of financial reporting. Read more about the Enterprise Risk Management (ERM) program on page 54. Key risks noted in local assessments and observations made by Internal and External Audit are also taken into consideration to ensure that adequate controls exist to mitigate these risks.
Mandatory control activities include business process controls, IT controls and corporate governance controls focusing on compliance with policies and procedures. Internal controls are tailored per each operational entity based on risks and applicability. Entity management and process owners are responsible for ensuring that internal controls are operated as per agreed design.
At Group level, Group Control manages the reporting process to ensure the completeness and accuracy of financial reporting and compliance with IFRS requirements.
Controllers in the divisions and business areas perform analytical reviews and investigations, conduct business trend analyses and update forecasts.
Policies and procedures related to financial reporting are updated and communicated on a regular basis to all entities.
Results of monitoring and status of improvement activities related to internal controls are included in the CFO report which is part of the agenda for the Audit Committee meetings.
Quarterly interim reports are published externally and are supplemented by investor meetings attended by members of the Group Executive Management.
Entity management as well as local and global process owners are responsible for testing the effectiveness of internal controls through self-assessments on a quarterly basis and according to the requirements in the Sandvik Internal Control Framework. Results of the self-assessment testing of controls including test evidence are reported and consolidated in a Governance, Risk and Compliance IT tool. The
tool also requires reporting of action plans with the purpose to remediate ineffective controls.
Business areas and divisions are to monitor the remediation of ineffective controls. The Audit Committee monitors the effectiveness of internal controls related to financial reporting presented by management with potential deficiencies and suggested actions.
The Board reviews all quarterly interim reports as well as the Annual Report prior to publishing. The Audit Committee reports to the Board regarding internal control matters including matters for resolution. Minutes from Audit Committee meetings are made available to Board members.
Internal Audit is subordinated to the Audit Committee and the Head of Internal Audit reports to the Audit Committee.
Internal audits include, as a basis, the Group's policies for corporate governance, risk management and internal control regarding 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 business area management and to the Audit Committee.
Due to the Covid-19 pandemic and the global travel restrictions, we developed an off-site audit methodology to continue executing the audit assignments remotely and provide assurance to the Audit Committee.
Born 1959. Chairman of the Board since 2015. Chairman of the Remuneration Committee and Acquisitions and Divestitures Committee and member of the Audit Committee. Education and business experience: M.Sc. in Business and Economics, Stockholm
School of Economics. President and CEO of ASSA ABLOY 2005–2018. President and CEO of Nilfisk-Advance 2001–2005 and various positions within Atlas Copco 1983–2001.
Current board assignments: – Shareholding in Sandvik (own and closely related persons): 260,000 as well as 1,000,000 call options.
Born 1951. 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 Barclays Bank Ireland plc.
Shareholding in Sandvik (own and closely related persons): 10,000.
Born 1962. Board member since 2015. Chairman of the Audit Committee and member of the Acquisitions and Divestitures Committee. Education and business experience: M.Sc. in Business and Economics, Stockholm School of Economics. Executive 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 and Förvaltnings AB Lunden. Shareholding in Sandvik (own and closely related persons): 30,000 (of which 10,000 were acquired on January 29, 2021).
Born 1963. Board member since 2017. Education and business experience: Master of Business Administration. CFO and Group Executive Vice President of Vestas Wind Systems A/S since 2013. CFO of Gambro AB 2009–2012, CFO of Autoliv Inc. 2008–2009 and various positions within Volvo 1996–2008, including CFO and Senior Vice President Finance and Strategy at Volvo Construction Equipment Corporation.
Current board assignments: Board member of AB Industrivärden and SSAB AB. Shareholding in Sandvik (own and closely related persons): 2,500.
Born 1957. Board member since 2011. Member of the Remuneration Committee. Education and business experience: M.Sc. in Engineering. President of Skanska AB 2008–2017, various positions within Skanska 2001–2008 and various senior positions within BPA (currently Bravida) 1995–2000. Current board assignments: Board member of CRH plc.
Shareholding in Sandvik (own and closely related persons): 5,000.
Born 1970. Board member since 2016. Member of the Audit Committee, Remuneration Committee and Acquisitions and Divestitures Committee.
M.Sc. in Business Administration. President and CEO of AB Industrivärden since 2015. Investment manager and subsequently partner at IK Investment Partners 1998–2015 and consultant at Bain & Company 1997–1998.
Current board assignments: Board member of AB Industrivärden, AB Volvo and Telefonaktiebolaget LM Ericsson.
Shareholding in Sandvik (own and closely related persons): 5,000.
Björn Rosengren, Sandvik's previous President and CEO, left the Board as of February 1, 2020. Lars Westerberg, Board member, left the Board as of April 28, 2020. Mats W Lundberg, deputy employee representative, left the Board as of December 15, 2020.
Information regarding Board assignments and holdings of shares as of December 31, 2020. Current Board assignments refer to assignments in companies or organizations outside the Sandvik Group.
Born 1977. Board member since 2020. Education and business experience: M.Sc. Applied Physics and Electrical Engineering and Bachelor of Business Administration. President and CEO, Sandvik AB, since February 1, 2020. President of the Sandvik Manufacturing and Machining Solutions business area since October 1, 2020. Various positions within the ASSA ABLOY Group 2006–2020, including Executive Vice President HID Global division 2015–2020, Director of Product Management and General Manager of Shared Technologies Unit. Various positions in the Saab Group 2001–2006.
Current board assignments: – Shareholding in Sandvik (own and closely related persons): 43,152.
Born 1959. Board member since 2020. Education and business experience: M.Sc. in Mechanical Engineering, the Royal Institute of Technology, Stockholm, Sweden. President and CEO of Husqvarna AB 2013–2020. Operations partner at IK Investment Partners Norden AB 2011–2013, President and CEO of Seco Tools AB 2004–2010 and various positions within ABB 1985–2004.
Current board assignments: Chairman of the Board of Electrolux Professional AB and Board member of AB Electrolux.
Shareholding in Sandvik (own and closely related persons): 12,000.
Born 1966. Board member since 2006 (employee representative, IF Metall). Education and business experience: Chairman of the Union Committee, Metal Worker's Union, Sandvik Materials Technology. Various positions within Sandvik since 1986. Current board assignments: – Shareholding in Sandvik (own and closely related persons): 2,889.
HONORARY CHAIRMAN
1983–2002.
PERCY BARNEVIK
Born 1941. Chairman of the Board of Sandvik AB
Born 1975. Board member since 2016 (employee representative, Unionen/Ledarna/Swedish Association of Graduate Engineers).
Education and business experience: Technical College Graduate – Mechanical Engineering. Chairman Trade Union, Unionen Sandvik Sweden and Unionen Coromant and Machining Solutions. Various purchasing positions within Sandvik 2000–2010 and production and logistics positions within Scania 1995–2000. Current board assignments: – Shareholding in Sandvik (own and closely related persons): 4,840.
Born 1969. Secretary to the Board since 2014. Executive Vice President and General Counsel, Sandvik AB, since 2014.
Born 1962. Deputy Board member since 2012 (employee representative, IF Metall). Education and business experience: Chairman of the Union Committee, Metal Workers' Union, Sandvik Coromant, Gimo. Various operator positions at Gimoverken, Sandvik Coromant, since 1984. Construction firm Anders Diös 1980–1984. Current board assignments: –
Shareholding in Sandvik (own and closely related persons): 0.
Auditor-in-charge:
Peter Nyllinge, Authorized Public Accountant. Other auditing assignments: Saab AB and Fagerhults Belysning AB.
Born 1977. President and CEO, Sandvik AB, since February 1, 2020. President of the Sandvik Manufacturing and Machining Solutions business area since October 1, 2020.
Education and business experience: M.Sc. Applied Physics and Electrical Engineering and Bachelor of Business Administration. Various positions within the Assa Abloy Group 2006–2020, including Executive Vice President HID Global division 2015–2020, Director of Product Management and General Manager of Shared Technologies Unit. Various positions in the Saab Group 2001–2006.
Current board assignments: – Shareholding in Sandvik (own and closely related persons): 43,152.
Born 1969. President of the Sandvik Mining and Rock Solutions business area since January 1, 2021.
Education and business experience: M.Sc. Accounting and Finance. Various positions within Sandvik since 2014, including President of the Sandvik Mining and Rock Technology business area, President of the Rock Tools division, President of the Global Equipment division and Vice President Strategy within Sandvik Mining and Rock Technology. Previously leading positions at McKinsey, Ericsson and several high-tech start-ups.
Current board assignments: – Shareholding in Sandvik (own and closely related persons): 18,452.
Born 1977. 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. Various positions within Sandvik since 2006, including Vice President Communication and Marketing at Sandvik Coromant.
Current board assignments: – Shareholding in Sandvik (own and closely related persons): 4,879.
Born 1965. President of the Sandvik Materials Technology business area since 2017. Education and business experience: M.Sc. in Mechanical Engineering. Various positions within Sandvik since 1990, including Head of Business Development, Vice President Production Strategy and Vice President Production at Sandvik Coromant and Head of Primary Products at Sandvik Materials Technology . Current board assignments: Chairman of the Swedish Association of Industrial Employers (Industriarbetsgivarna), board member of the Confederation of Swedish Enterprise (Svenskt Näringsliv) and board member of the Swedish Steel Producers' Association (Jernkontoret). Shareholding in Sandvik (own and closely related persons): 4,718.
Born 1971. President of the Sandvik Machining Solutions business area segment since October 1, 2020.
Education and business experience:
M.Sc. in Mechanical Engineering. President of Sandvik Coromant 2017–2020. Various other positions within Sandvik Coromant since 2000, including Vice President Customized Solutions and Strategic Relations, and Sandvik Coromant Manager Switzerland. Project Engineer and Consultant for the metal cutting industry at WTCM (today Sirris) 1995–2000.
Current board assignments: Board member of Rosti Group.
Shareholding in Sandvik (own and closely related persons): 5,008.
Born 1962. Executive Vice President and Chief Financial Officer, Sandvik AB, since 2016. Education and business experience: B.Sc. in Business Administration and Economics. CFO of AB Electrolux 2012–2016, CFO and Executive Vice President of ASSA ABLOY AB 2006–2012, CFO of Seco Tools AB 2002–2006 and various positions within ABB 1987–2002. Current board assignments: Board member of Millicom International Cellular S.A. Shareholding in Sandvik (own and closely related persons): 17,044.
Born 1970. Executive Vice President and Head of Human Resources, Sandvik AB, since 2016. Education and business experience: M.Sc. in Business and Economics. Various positions in Human Resources and Organizational Development within Sandvik since 2004 and consultant at Cap Gemini 1999–2003. Current board assignments: – Shareholding in Sandvik (own and closely related persons): 8,320.
Born 1975. President of the Sandvik Rock Processing Solutions business area since January 1, 2021.
Education and business experience: M.Sc. in Chemical Engineering. President of the Crushing and Screening division 2016–2020. Various position within Sandvik since 2008, including President Customer Services, SVP Global sales, Sandvik Construction and Chief Purchasing Officer Sandvik Construction/ Sandvik Mining. Previously leading positions within Metso Minerals.
Current board assignments: – Shareholding in Sandvik (own and closely related persons): 3,157.
Born 1969. Executive Vice President and General Counsel, Sandvik AB, since 2014. Education and business experience: Master of Laws (LL.M), Sweden and the Netherlands. Various positions within Securitas 2009–2014, including General Counsel, Elekta AB 1999–2009, including General Counsel, and Lagerlöf & Leman law firm 1996–1999. Current board assignments: Board member of the Swedish Association of Listed Companies (Aktiemarknadsbolagens förening). Shareholding in Sandvik (own and closely related persons): 4,990.
Björn Rosengren, Sandvik's previous President and CEO, left the company as of February 1, 2020. Lars Bergström left the company as of January 1, 2021.
Information regarding board assignments and holdings of shares as of December 31, 2020. Current board assignments refers to assignments in companies or organizations outside the Sandvik Group.
Sandvik risk management processes support our business to manage and effectively mitigate critical risks.
The ability to effectively identify and manage risk is a vital element of business success for all parts of the Sandvik business.
The Group's risk management approach follows our decentralized structure. The Sandvik Board of Directors is ultimately responsible for the governance of risk management. Sandvik's Group Executive Management ensures there is a common and efficient process in place.
All management teams are responsible for their own risk management. The teams must follow the minimum requirements outlined in The Sandvik Way.
Part of the Board's requirements are clear and transparent information about Sandvik's enterprise risks and mitigating activities.
Sandvik has implemented an Enterprise Risk Management (ERM) program that covers all business areas, divisions and functions within the Group. The management teams analyze risks in their operations and
related to their strategic objectives at least annually. About 80 workshops are conducted annually within the business. These include assigning risk owners and establishing mitigating action plans with follow-up procedures. Assessment and management of sustainability risks are integrated and significant parts of the ERM program. In addition, the ERM methodology is used as a tool for decision-making, operationally and within projects, as well as in the strategy process in various levels of the Group. The Group Executive Management reviews and discusses the Sandvik Group risk appetite and decides on the Group risk profile once per year, based on a bottom-up risk assessment, an external risk outlook and top management input. An ERM report, summarizing key risks and mitigating activities across our business, was provided to Sandvik's Audit Committee and Board of Directors in December. The Board of Directors' and the Audit Committee's involvement in the ERM process is further described on pages 45–47.
Sandvik has tailored insurance programs that transfer the risks associated with the Group's property, cargo and liability exposures. Insurable risks are continuously evaluated and actions are taken to reduce these insurable risks, as part of Sandvik's loss-prevention strategy. Supported by our loss-prevention guidance, risk evaluations highlight opportunities to reduce the potential for business interuption and to ensure the Group's ability to deliver to its customers. In order to ensure cost efficient and tailored insurance solutions, selected risks are reinsured through the Group's captive insurance company.
The global risk management policy and related procedures for business continuity and crisis management set the requirements for local management teams to ensure their ability to successfully respond to disruptive events and continue their
ERM PROCESS AT SANDVIK
Assess and evaluate risks Communicate risks Manage risks Monitor and
follow up risks
business operations on an acceptable level. Once a risk materializes, our crisis management priorities are to minimize harm to people, to the environment, and to minimize damage to Sandvik's business, as well as ensuring a swift return to normal activities and safeguarding the company brands.
Although none of our divisions had a pandemic included in their risk profiles, the response to the Covid-19 pandemic was handled in a professional way. Our decentralized governance model enabled us to be agile with local country coordination to safeguard our employees and with global coordination on a business area level to safeguard supply chain and allocation of production. Many divisions did have a pandemic as one of the scenarios covered in their crisis management and could quickly respond when Covid-19 began to spread globally.
It is encouraging to see how our processes within risk management complement each other and support us in effectively mitigating and acting when a crisis occurs. This includes the Business Continuity Management procedure which has proven to further strengthen our resilience and preparedness for sudden events.
The internal audit function regularly follows up the implementation of different risk management programs such as ERM, business continuity, crisis management and the insurance programs. Sandvik applies groupwide internal controls to mitigate primarily financial risks but also some of the business risks. Read more about the internal controls program at Sandvik on page 48–49.
Sandvik's risk universe is based on risk categories that are organized in three main risk areas – strategic risks, business risks and financial risks. Each risk category can in one way or another significantly impact the Group's performance if not managed effectively. The detailed risk universe is outlined on page 56.
Strategic risks are risks that can significantly impact the execution of our business strategies and our ability to achieve our objectives. At Sandvik we include external and emerging risks in this risk area, such as industry shifts, technological shifts and macroeconomic developments. These risks can all impact our business negatively long term but often also create business opportunities if managed well. Our approach to managing these risks differs from other categories as it includes evaluation of which strategic risks to take and improving the business ability to manage them by establishing risk tolerance, predicting the impact of possible risks and monitoring key risk indicators (KRIs).
In this risk area we include operational and commercial risks. These types of risks can often impact the financial performance of the business negatively or can have a negative reputational impact on the brands of the Group. Examples are sustainability risks, such as health and safety risks and compliance risks, and operational risks, such as cyber security risks, IT failures, information and data protection as well as talent attraction and retention. The approach to managing these risks is through active prevention and by designing and implementing mitigation actions and controls.
Through its complex and international operations, Sandvik is exposed to multiple financial risks such as currency risks, interest risks, liquidity and refinancing risks. Sandvik's Group Treasury is functionally responsible for managing the greater part of the Group's financial risks. The Board of Directors establishes the principles for the Group's financial risk management, which comprises guidelines, objectives, and limits for financial management as well as the management of financial risks.
Operating entities 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 and 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. More information is available in the Corporate Governance Report on page 43.
For information about currency risks, interest risks, liquidity and refinancing risks, credit risks, raw material price risks and pension commitments, please see note G28.
Our risk universe has been developed through analysis and stakeholder dialogue of material risks for our industry, our different businesses, critical laws and regulations and critical operational, commercial, sustainability and financial requirements. It is a comprehensive library of risks which management teams apply to better understand, evaluate and aggregate risk within the business. The risk categories highlighted below refer to the Sandvik Group's identified key risks assessed during 2020.
B1. Noncompliance with laws and regulations
B5. Intellectual property management
B9. IT capacity or capabilities
B10. Information and data protection
B19. Customer retention
B20. Pricing models and management
B37. Supplier and sourcing management
| Risk category | Identified key risk | Risk consequence | Risk mitigation |
|---|---|---|---|
| S1. Industry shifts and market developments |
Changing competitive landscape with decreased demands for certain products or segments and an increased demand for a sustainable offering. |
The inability to reach strategic objectives long term, leading to lower growth or lower financial performance. |
Increased focus on M&As and business development to broaden existing product portfolio and meet customer demand for digital solutions, electrification and services. Competitor and market development is closely monitored and strategies are in place to reduce dependency on individual customer segments. The Covid-19 pandemic has given us further experience on our resilience, flexibility and ability to handle decline in specific segments and to reallocate resources to segments less effected by the pandemic. |
| S2. Macroeconomic developments B13. Change management/ demand/readiness |
Our ability to adapt to macroeconomic developments. |
The inability to plan long term, leading to less agile business, higher costs or price models not being profitable, causing lower financial performance long term. |
All businesses are working with strong cost control and cost flexibility. All businesses are closely monitoring relevant Key Risk Indicators (capex investment in mining, raw material prices, GDP, oil rig count, daily order rates, etc.). They all have up to date contingency plans, including different scenarios, ready to activate at the first sign of a downturn. |
| S3. Technological change/ shifts |
New and evolving technologies or technological demands leads to the need to attract new talent in key competence areas (digitalization, sustainability, etc). |
The inability to reach strategic objectives long term, leading to lower growth or financial performance. A general risk of losing competitiveness and business position on the market with a special risk focus if not being able to take a strong position in the digital area fast enough. |
There is a strong focus on R&D in all our businesses as well as proactive business development and M&A activities where growth is a priority. The business is closely monitoring the development of new technologies and customer segments. Partnerships have been formed with key partners and research centers to advance knowledge and capabilities in areas currently outside the core business. The business has also invested in additive manufacturing, powder technology, digitalization and automation. Sandvik has, across the business areas, focused on developing the Sandvik employer brand. One key area is to use new, digital channels to attract and recruit competence for the future. Succession planning has been strengthened for top management positions. |
| S4. Regulatory change |
Changes in trade laws or chemical legislations. Stricter sustainability requirements. |
The inability to quickly respond to new regulations leading to higher costs, fines or the inability to continue manufacturing certain products. Can have a negative reputational impact. |
All parts of Sandvik work with the monitoring of different initiatives and continually evaluate their impact on our business. We are active in business associations and other organizations, such as Jernkontoret, Svenskt Näringsliv, the Cobalt Institute and the International Tungsten Industry Association to name a few, to monitor regulatory development to benefit long-term sustainable business. |
| S6. Sustainability expectations and/or requirements |
Conflicting short- versus long-term financial priorities, leading to not meeting the 2030 sustainability goals, loss of competitiveness and stakeholder trust. |
Not meeting customers' expectations of new business models built on sustainability. Negative reputational impact and not meeting stakeholder expectations could lead to a loss of business. Negative impact on the share's attraction as an investment as well as on the attraction and retention of future or current employees. |
The Group Executive Management has the overall responsibility for Sandvik's sustainability strategy and agenda while the business areas / divisions are responsible for the implementation and follow-up. The business areas / divisions are also responsible for the assessment and management of sustainability risks in their operations. KPIs are consolidated and reported to follow up on goals at Group and business area / division levels. Each year we evaluate our performance, set targets and focus actions for the coming year to ensure delivery on our sustainable business strategy. |
| B1. Noncompliance with laws and regulations |
Breach of anti-bribary, anti corruption, competition or antitrust laws, General Data Protection Regulations (GDPR) or trade compliance. |
Worst-case scenarios show high financial impact due to fines in multiple markets. Can have a major negative reputational impact if risk were to materialize. |
The Sandvik Way, our governance framework, includes Group policies, Group procedures and other steering documentation, and is based on legal requirements and risk exposure with oversight through a Group functional council. To truly embed compliance in the business we have introduced the Compliance House, a system that enables the business to control and understand the status of compliance within their organizations. The Compliance House contains a breakdown of all the requirements in our four compliance programs: Anti-Bribery & Corruption, Competition Law, Data Privacy and Trade Compliance. |
| B7. IT failures B8. Insufficient IT security |
Major IT incident causing significant downtime in critical operational IT systems or services. Incident could be caused by cyberattack resulting also in ransom demand and reputational loss. |
Inability to deliver products or services on time to customers or timely information to other stakeholders, leading to lower financial performance or negative financial impact due to fines. |
Revision of cyber security improvement program being planned to address multiple areas. Each business area is running an IT security improvement program, including risk review of critical business applications and risk-based network segmentation. Project initiated to investigate resilience of business critical systems and services and facilitate improvement in this area. |
| B4. Product development and product support B8. Insufficient IT security |
Lack of security in digital offering lifecycle. |
Risk of compromising data and automation systems with negative reputational and financial impact. Risk of exposure to Sandvik internal IT systems. |
All business areas/ divisions are identifying the risks associated with their digital offering and taking appropriate actions to mitigate these risks. |
| B10. Information and data protection |
Leakage of confidential information and unstructured content management for internal systems as well as external platforms. Weaknesses in identity and access management and governance. |
Can lead to business critical information being made available to unauthorized individuals or organizations. |
Target architecture work for identity and access management area to be launched during 2021 in order to mitigate risk. Increased authentication to prevent unauthorized access has been implemented. All business areas have strengthened their IT security management. A review of key processes for information release and overall communication channels has been initiated. |
| B15. Business interruptions |
Unforeseen major disturbance or failure in production or supply chain, caused by, for example, weather events, machinery break-downs, fires or pandemics. |
Inability to deliver products or services on time to customers or timely information to other stakeholders, leading to lower financial performance or negative financial impact due to fines. |
The Group's Risk Management Policy was approved by the Group Executive Management in 2020. Procedures for Crisis Management and Business Continuity are continuously updated. Business areas/ divisions have performed risk scenario planning for some of the most critical production entities, supply chain vulnerabilities and IT system dependencies. |
| B36. M&A transactions or integration |
Not being successful in identifying acquisition targets, completing efficient M&A processes and subsequent integration. |
Our growth targets for the coming years are dependent on us delivering on our M&A strategy. Not being able to identify, complete and integrate acquisitions could have a major impact on our growth objectives and |
Business areas and divisions are continuously reviewing their acquisition plans, capability and efficiency ensuring enough resources are in place to identify, analyze and integrate M&A targets. In addition, Group Functions are strengthening their ability to support the business in the M&A processes. |
financial performance.
Sandvik's business strategy, business model and the 2030 sustainability Goals (see pages 9–11) form the basis for the company's sustainable business governance. Relevant goals are set to address material areas and efficiently manage related risks and opportunities. Policies and management systems have been set to ensure financial, environmental and social compliance.
The Sandvik Board of Directors, has the overall responsibility for sustainability within Sandvik, monitored by the Audit Committee. The Group Executive Management has the overall responsibility for Sandvik's sustainability strategy and agenda while the business areas and divisions are responsible for the implementation and follow-up. The Legal function is responsible for the coordination within the Group. The business areas are also responsible for the assessment and management of sustainability risks in their operations. KPIs are consolidated and reported to follow up on goals at Group and business area levels. Each year we evaluate our performance, set targets and focus actions for the coming year.
The Sustainability Council is a forum for cooperation and best practice sharing across Sandvik. The Council comprises representatives from the business areas and group functions. The Sustainable Business function coordinates the sustainability agenda together with the business areas.
The Sandvik Code of Conduct is a cornerstone for our company.
Sandvik has a long history of working in accordance with applicable laws and internationally recognized principles, as well as in partnership with our local communities. Our Code of Conduct is built on our internal Core Values and external principles, such as the International Bill of Human Rights, the International Labour Organization's Declaration on Fundamental Principles and Rights at Work, the Rio Declaration on Environment and Development, and the United Nations Convention against Corruption as outlined in the ten principles of the United Nations Global Compact, in which we participate. We are also committed to adhering to the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights. We believe that by doing so we are providing a solid foundation that supports a more sustainable future for Sandvik and for our stakeholders.
The Code of Conduct is a vital component in The Sandvik Way governance model, which encompasses common steering documents and processes, such as our policies and procedures. The Sandvik Way also describes a common culture and ways of working and is an important enabler for achieving our 2030 sustainability goals.
Employees and external parties who witness a violation of the Code of Conduct, laws or our policies can report the violation, anonymously, through the global reporting tool Speak Up. All reports are assigned an investigator from the relevant business area that conducts the investigation. The Ethics Office oversees the effectiveness of the Speak Up process. Reports, investigations and remediations are recorded, monitored and included in reporting to the Audit Committee.
No retaliation may be taken against an employee or business partner who, in good faith, voices their concern, as is outlined in Sandvik's Speak Up Policy.
Sandvik's Compliance System includes four areas: anti-bribery and corruption, competition law, trade compliance and data privacy. To emphasize the importance of a fully embedded and agile Compliance System within the business, the Compliance System is part of Sandvik's 2030 goals (see pages 9–11). The purpose is to ensure a well-functioning structure with control over Sandvik's international business and to manage compliance risks in all countries in which Sandvik operates. Compliance programs, including risk identification, policies, training, controls, etc., are implemented by each business area and overseen by the Sandvik Compliance Functional Council which sets requirements, reviews performance and provides assurance of satisfaction to the Board of Directors through the Audit Committee. The Council comprises business area and Group Compliance Officers and the Head of Business Integrity.
Our commitment to human rights and fair labor conditions is confirmed in our Code of Conduct and in our Supplier Code of Conduct in which we support, amongst others, the International Bill of Human Rights, the International Labour Organization's Declaration on Fundamental Principles and Rights at Work and the UN Guiding Principles on Business and Human Rights. The Sandvik Code of Conduct, supported by our core values, also provides guidance in identifying, preventing and mitigating risks related to human rights and fair labor conditions.
To mitigate risks related to human rights, we continuously work to ensure compliance with national
legislation and internationally agreed human rights standards and regulations. We regularly evaluate our processes and procedures for identifying, preventing and mitigating these risks in the Group's operations and in our value chain. Our work on human rights and fair working terms is integrated in our regular processes and procedures in different ways, for example, in our Sustainable Supplier Management, our safety work and in our diversity and inclusion scheme. We have zero tolerance for forced or slave labor and child labor.
We support children's rights and the right to education through our community involvement initiatives in, for example, a Sandvik Fellow project in India. All employees have the right, if they choose, to join a union and to be covered by a collective agreement. We do not accept any form of harassment or bullying and believe in a diverse workforce without any form of discrimination based on gender identity, ethnicity, national origin, age, disability, marital status, social group or any other characteristics.
Sandvik offers a diverse and inclusive workplace, fair remuneration and working terms that respect the needs of the individual. Sandvik has a People Policy that reflects Sandvik's commitment to our employees and outlines what employees can expect from us in relation to how we attract, develop and retain our employees and where appropriate, manage their exit from the business.
Our 5,200 managers play a crucial role in enabling teams to grow and deliver results. Our leadership model and our global leadership programs set clear expectations on both leadership capabilities and behaviors.
Through our Global Graduate Program, we attract and train young professionals at various parts of the Sandvik organization. One of the main purposes with the program is to develop and prepare graduates for future key positions, and after the program they are deployed into different roles within our business.
Diversity and inclusion are vital aspects of our people strategy and part of Sandvik's 2030 goals (see pages 9–11).
The responsibility for implementation and communication of the 2030 goals lies within the business, including securing resource needs and taking appropriate measures to ensure goal achievement. Sandvik has a diversity and inclusion forum with representatives from business areas and the Group with the purpose of working collaboratively to develop a diverse organization and a culture of inclusion. The forum collaborates on joint initiatives and shares best practices and experiences.
Sandvik has a zero-harm vision for our people, the environment we work in, our customers and our suppliers. All are explicitly included in our 2030 goals (see pages 9–11). Sandvik's EHS Policy, Group EHS Objectives and the 2030 Goals drive our health and safety activities. Each business area works to meet these objectives according to their own plans. Targets are set year on year to drive performance on all organizational levels towards the 2030 goals. In addition to our own internal operations, our EHS Policy includes a commitment to external relationships that Sandvik has in the market.
The Sandvik EHS Council consists of representatives from all business areas with its primary aim being to facilitate collaboration across the company that will enhance our progress towards our EHS vision. While EHS activities are decentralized within the business areas, the EHS Council is the forum for identifying, reaching consensus on and implementing common initiatives and procedures. In addition, the Council drafts documents, such as the EHS Policy and objectives and targets, for the Group Executive Management to consider and approve. The council can appoint working groups to work on specific EHS issues, for example environmental working groups.
Our EHS Management systems are based on ISO 14001, ISO 45001, OHSAS 18001 or equivalent standards. Management of individual topics follows the criteria of these frameworks but can go beyond. We have a common EHS Policy for the company and Group Procedures in areas where Sandvik wants to set standards that go above and beyond the requirements of our certified management systems. These procedures handle hazard identification and risk management; incident reporting, investigation and injury management; EHS performance measurement and monitoring; training and competence; small sites and offices procedure. Sites with a lower risk profile do not have to go through the process of external certification. However, these sites will be covered by the requirements in the Group procedure for small sites and offices.
Any specific issues of a more local nature, for example, effluent discharge limits or environmental permits, if not covered in legal requirements, certifications or Group procedures, will be local initiatives adapted to the specific needs at each production unit or business division. The scope of the EHS Management systems includes relationships also outside the company boundaries, and a responsibility to ensure high standards where Sandvik is in control of the work environment. This includes working with risk identification and mitigation in order to prevent any incidents of work-related injuries or occupational illnesses.
Environmental criteria are included in the process for sustainable supplier management and environmental and safety criteria are part of the product development process.
Each Sandvik-controlled location will implement and maintain formal systems and processes for risk assessments. All employees can and are encouraged to report the hazards they observe. The system supports a process for handling all hazards adequately and following them through to completion. The most senior Sandvik manager at each location is responsible for correct handling of the registered hazard.
Each business area / location has an Incident Reporting and Investigation system and is responsible for ensuring the findings from incident investigations are shared within the organization. All employees have access to a colleague in their immediate workplace or as part of their organization who is representing the EHS function within Sandvik.
Health and safety committees are organized depending on the nature of the local organization and the issues within that region. Typically, representatives are from local management, employees and EHS professionals.
Training is provided as part of the induction for all employees and in more depth to EHS professionals. Furthermore, EHS issues are integrated in any training for certain roles. Our training packages vary
from classroom training in-house to external training and self-learning, for example, e-learning.
Access to medical and healthcare services is designed based on local needs. It varies from having professional healthcare on site or agreements with external parties where our employees have access to vaccinations, health checks, etc. Health and well-being programs are offered and maintained for all employees. Enrollment is voluntary. The programs are adapted to local needs and address a wide range of issues such as fitness, nutrition, mental health and disease prevention.
Sandvik is committed to sustainable procurement practices that minimize our negative societal and environmental impacts, improve the sustainability performance of our suppliers and create value for business, our customers and society at large. It is important for us to partner with suppliers who understand and embrace our sustainability standards in areas such as environment, labor, human rights, anti-corruption, circularity of materials and carbon footprint. Our requirements are part of our 2030 sustainability goals and are outlined in our Supplier Code of Conduct, which was updated in 2020 and will be published in 2021. The responsibility of development and implementation of sustainable supplier management is decentralized and lies within each division.
Sandvik is involved in a wide variety of community relations projects around the world. Our platform for sponsorship and community involvement projects comprises four areas: Innovation – projects with a clear link to our daily work, products
and solutions, Education and Skills – projects that demonstrate our role as an employer and provide long-term employer branding value, Health and Safety – projects contributing to improved health and safety in society, and Local Enabler – projects creating joint value for our stakeholders and our employees.
We view our community projects as investments, for which we require contracts, clear target groups and objectives with measurable results. All activities must conform to our Code of Conduct, which means that we do not engage in any activities of a political or religious nature, or in projects that may be viewed as hazardous to health or the environment. All of our project partners must sign the Sandvik Supplier Code of Conduct and undergo the same screening process as our suppliers. As part of our 2030 Sustainability goals, we encourage our sites to be engaged in community activities with a positive impact on society.
| Income statement | 62 |
|---|---|
| Balance sheet | 63 |
| Changes in equity | 64 |
| Cash flow statement | 65 |
| G1 | Significant accounting principles | 66 | G19 | Trade receivables | 84 |
|---|---|---|---|---|---|
| G2 | Segment information | 68 | G20 | Other current receivables | 85 |
| G3 | Categories of revenue | 70 | G21 | Capital and reserves | 85 |
| G4 | Personnel information and remuneration of management |
71 | G22 | Provisions for pension and other non-current post-employment benefits |
86 |
| G5 | Remuneration to auditors | 74 | G23 | Other interest-bearing liabilities | 89 |
| G6 | Research and development costs | 74 | G24 | Other provisions | 89 |
| G7 | Other operating income | 74 | G25 | Other liabilities | 90 |
| G8 | Other operating expenses | 74 | G26 | Accrued expenses and deferred income | 90 |
| G9 | Operating expenses | 74 | G27 | Contingent liabilities and pledged assets | 90 |
| G10 | Net financial items | 74 | G28 | Supplementary information – | 91 |
| G11 | Income tax | 75 | financial risk management | ||
| G12 | Earnings per share | 76 | G29 | Transactions with related parties | 97 |
| G13 | Intangible assets | 77 | G30 | Supplementary information to the cash flow statement |
97 |
| G14 | Property, plant and equipment | 80 | G31 | Business combinations | 98 |
| G15 | Leases | 81 | G32 | Divestment, asset held for sale and | 101 |
| G16 | Shares in associated companies | 83 | discontinued operations | ||
| G17 | Non-current receivables | 83 | G33 | Government grants | 102 |
| G18 | Inventories | 84 | G34 | Events after the end of the period | 102 |
| MSEK | Note | 2019 | 2020 |
|---|---|---|---|
| Continuing operations | |||
| Revenue | G2, G3 | 103,238 | 86,404 |
| Cost of goods sold | -61,662 | -54,167 | |
| Gross profit | 41,576 | 32,237 | |
| Selling expenses | -14,946 | -10,710 | |
| Administrative expenses | -6,643 | -5,504 | |
| Research and development costs | G6 | -3,674 | -3,429 |
| Share of results of associated companies | G2 | 9 | 6 |
| Other operating income | G7 | 1,184 | 473 |
| Other operating expenses | G8 | -4,119 | -1,858 |
| Operating profit | G2, G4, G5 | 13,386 | 11,216 |
| Financial income | 492 | 1,163 | |
| Financial expenses | -1,729 | -1,110 | |
| Net financial items | G10 | -1,237 | 54 |
| Profit after net financial items | 12,150 | 11,270 | |
| Income tax | G11 | -3,421 | -2,517 |
| Profit for the year, continuing operations | 8,728 | 8,753 | |
| Loss for the year, discontinued operations | G32 | -205 | -32 |
| Profit for the year, group total | 8,523 | 8,721 | |
| Profit (loss) for the year attributable to: | |||
| Owners of the Parent Company | 8,539 | 8,735 | |
| Non-controlling interests | -16 | -14 | |
| Basic earnings per share, SEK | G12 | ||
| Continuing operations | 6.97 | 6.99 | |
| Discontinued operations | -0.16 | -0.03 | |
| Group total | 6.81 | 6.96 | |
| Diluted earnings per share, SEK | G12 | ||
| Continuing operations | 6.96 | 6.98 | |
| Discontinued operations | -0.17 | -0.03 | |
| Group total | 6.79 | 6.95 | |
| Consolidated statement of comprehensive income | |||
| Profit for the year | 8,523 | 8,721 | |
| Other comprehensive income | |||
| Items that cannot be reclassified to profit (loss) for the year | |||
| Actuarial gains (losses) on defined-benefit pension plans | G22 | -1,638 | -1,146 |
| Tax relating to items that cannot be reclassified to profit (loss) for the year | G11 | 323 | 225 |
| -1,315 | -921 | ||
| Items that can be reclassified to profit (loss) for the year | |||
| Translation differences during the year | 1,880 | -4,754 | |
| Fair-value changes in cash flow hedges | 30 | 28 | |
| Fair-value changes in cash flow hedges transferred to profit (loss) for the year | -2 | 0 | |
| Tax related to fair-value changes in cash-flow hedges | G11 | -8 | -8 |
| 1,900 | -4,734 | ||
| Total other comprehensive income for the year | 585 | -5,655 | |
| Total comprehensive income | 9,108 | 3,066 | |
| Total comprehensive income for the year attributable to: | |||
| Owners of the Parent Company | 9,124 | 3,077 | |
| Non-controlling interests | -16 | -11 |
| MSEK | Note | 31 Dec 2019 | 31 Dec 2020 |
|---|---|---|---|
| Assets | |||
| Non-current assets | |||
| Intangible assets | G13 | 20,074 | 21,004 |
| Property, plant and equipment | G14 | 25,643 | 23,975 |
| Right-of use assets | G15 | 3,172 | 2,891 |
| Shares in associated companies | G16 | 292 | 508 |
| Financial assets | 83 | 81 | |
| Deferred tax assets | G11 | 3,797 | 4,098 |
| Non-current receivables | G17 | 2,390 | 2,598 |
| Total non-current assets | 55,450 | 55,155 | |
| Current assets | |||
| Inventories | G18 | 24,243 | 21,473 |
| Trade receivables | G19 | 14,878 | 12,369 |
| Income tax receivables | G11 | 1,403 | 676 |
| Other receivables | G20 | 4,785 | 4,522 |
| Prepaid expenses and accrued income | 896 | 822 | |
| Cash and cash equivalents | 16,953 | 23,752 | |
| Assets held for sale | G32 | 1,815 | 361 |
| Total current assets | 64,973 | 63,973 | |
| Total assets | 120,423 | 119,128 | |
| Equity and liabilities | |||
| Equity | |||
| Share capital | 1,505 | 1,505 | |
| Other paid-in capital | 7,678 | 7,678 | |
| Reserves | 7,010 | 2,274 | |
| Retained earnings incl. profit (loss) for the period | 45,651 | 53,624 | |
| Equity attributable to owners of the Parent Company | 61,844 | 65,081 | |
| Non-controlling interest | 14 | 1 | |
| Total equity | G21 | 61,858 | 65,082 |
| Non-current liabilities | |||
| Provision for pensions | G22 | 7,765 | 8,822 |
| Interest-bearing liabilities | G23, G28 | 17,619 | 13,536 |
| Deferred tax liabilities | G11 | 2,299 | 2,059 |
| Other provisions | G24 | 1,193 | 1,409 |
| Other liabilities | G25 | 298 | 274 |
| Total non-current liabilities | 29,174 | 26,099 | |
| Current liabilities | |||
| Interest-bearing liabilities | G23, G28 | 3,026 | 4,352 |
| Accounts payable | 7,598 | 6,974 | |
| Income tax liabilities Other liabilities |
G11 G25 |
3,744 4,507 |
2,695 4,077 |
| Other provisions | G24 | 2,693 | 3,381 |
| Accrued expenses and deferred income | G26 | 6,944 | 6,297 |
| Liabilities directly attributed to assets held for sale Total current liabilities |
G32 | 880 29,391 |
171 27,947 |
| Total liabilities | 58,564 | 54,046 | |
| Total equity and liabilities | 120,423 | 119,128 |
| Equity attributable to owners 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 January 1, 2019 | 1,505 | 7,678 | 5,110 | 43,827 | 58,120 | 42 | 58,162 |
| Profit for the year | – | – | – | 8,539 | 8,539 | -16 | 8,523 |
| Other comprehensive income (loss) | – | – | 1,900 | -1,315 | 585 | – | 585 |
| Total comprehensive income (loss) for the year | – | – | 1,900 | 7,224 | 9,124 | -16 | 9,108 |
| Transactions with owners | |||||||
| Acquired non-controlling interest | – | – | – | 3 | 3 | -3 | 0 |
| Share-based payment settled by equity instruments |
– | – | – | 97 | 97 | – | 97 |
| Payments on exercise of options program | – | – | – | 20 | 20 | – | 20 |
| Reduction of hedge options programs | – | – | – | -189 | -189 | – | -189 |
| Dividend | – | – | – | -5,331 | -5,331 | -9 | -5,340 |
| Equity at December 31, 2019 | 1,505 | 7,678 | 7,010 | 45,651 | 61,844 | 14 | 61,858 |
| Equity at January 1, 2020 | 1,505 | 7,678 | 7,010 | 45,651 | 61,844 | 14 | 61,858 |
| Adjustment on correction of error | – | – | – | -53 | -53 | – | -53 |
| Equity at January 1, 2020 | 1,505 | 7,678 | 7,010 | 45,598 | 61,791 | 14 | 61,805 |
| Profit for the year | – | – | – | 8,735 | 8,735 | -14 | 8,721 |
| Other comprehensive income (loss) | – | – | -4,736 | -921 | -5,657 | 3 | -5,655 |
| Total comprehensive income (loss) for the year | – | – | -4,736 | 7,814 | 3,077 | -11 | 3,066 |
| Transactions with owners | |||||||
| Acquired non-controlling interest | – | – | – | 2 | 2 | -2 | 0 |
| Share-based payment settled by equity instruments |
– | – | – | 34 | 34 | – | 34 |
| Payments on exercise of options program | – | – | – | 0 | 0 | – | 0 |
| Increase/reduction of hedge options programs | – | – | – | 176 | 176 | – | 176 |
| Dividend | – | – | – | – | – | – | – |
| Equity at December 31, 2020 | 1,505 | 7,678 | 2,274 | 53,624 | 65,081 | 1 | 65,082 |
| MSEK | Note | 2019 | 2020 |
|---|---|---|---|
| Group total | |||
| Cash flow from operating activities | |||
| Income after net financial items | 11,945 | 11,238 | |
| Adjustment for depreciation, amortization and impairment losses | 10,077 | 5,964 | |
| Other adjustment for non-cash items | G30 | 428 | 926 |
| Payment to pension fund | G22 | -747 | -674 |
| Income tax paid | -3,598 | -3,518 | |
| Cash flow from operating activities before changes in working capital | 18,105 | 13,935 | |
| Changes in working capital | |||
| Change in inventories | 474 | 867 | |
| Change in operating receivables | 1,168 | 1,533 | |
| Change in operating liabilities | -2,090 | -344 | |
| Cash flow from changes in working capital | -447 | 2,055 | |
| Investments in rental equipment | -911 | -935 | |
| Proceeds from sale of rental equipment | 147 | 292 | |
| Cash flow from operating activities, net | 16,894 | 15,347 | |
| Cash flow from investing activities | |||
| Acquisition of companies and shares, net of cash acquired | G31 | -1,870 | -3,274 |
| Proceeds from sale of companies and shares, net of cash disposed | G32 | 95 | 778 |
| Acquisition of tangible assets | -3,472 | -2,684 | |
| Proceeds from sale of tangible assets | 397 | 269 | |
| Acquisition of intangible assets | -664 | -514 | |
| Proceeds from sale of intangible assets | 42 | 0 | |
| Acquisition of financial assets | – | -74 | |
| Proceeds from sale of financial assets | – | 633 | |
| Other investments, net | 281 | 89 | |
| Cash flow from investing activities, net | -5,191 | -4,775 | |
| Cash flow from financing activities | |||
| Repayment of borrowing | -6,664 | -2,354 | |
| Proceeds from borrowings | 60 | 56 | |
| Dividends paid | -5,340 | – | |
| Amortization, lease liabilities | G30 | -945 | -1,012 |
| Cash flow from financing activities, net | -12,890 | -3,310 | |
| Cash flow for the year | -1,188 | 7,261 | |
| Cash and cash equivalents at beginning of year | 18,089 | 16,987 | |
| Foreign exchange differences on cash and cash equivalents | 86 | -496 | |
| Cash and cash equivalents at the end of year | G30 | 16,987 | 23,752 |
| Continuing operations | |||
| Cash flow from operating activities, net | 17,046 | 15,414 | |
| Cash flow from investing activities, net | -5,206 | -4,777 | |
| Cash flow from financing activities, net | -12,890 | -3,310 | |
| Cash flow from continuing operations | -1,050 | 7,327 |
The consolidated financial statements comprise Sandvik AB, corporate registration number 556000 –3468, (the Parent Company) and all its subsidiaries, jointly the Group with registered office in Stockholm, Sweden. The Group also includes the share of investments in associated companies.
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.
Accounting principles are presented in this note or in connection to the note of which they aim to describe.
The symbol and heading show where the accounting principles are described in each note.
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 principles as those applied in the consolidated financial statements except as set out in note P1 on page 108 in the section "Parent Company's accounting principles."
The financial statements are presented on pages 36–124 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 March 1, 2021. The Group's and the Parent Company's income statements and balance sheets are subject to adoption at the Annual General Meeting on April 27, 2021.
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 of derivative instruments and plan assets in the defined benefit plans. 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 had a significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year, are discussed further 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 and in the notes, 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 in the Group reporting of associated companies, where necessary, by adaptation to Group policies.
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.
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 re-translated 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 non-current liabilities are included in the accumulated translation differences reclassified from the translation reserve in equity to profit or loss for the year.
IASB has published amendments of standards that are effective as of January 1, 2020 or later. The standards have not had any material impact on the financial reports.
The amendment clarifies the definition of a business. A business includes, at a minimum, an input, a substantive process that together, significantly contribute to the ability to create output. The definition of the term outputs is amended to focus on goods and services provided to customers, generating investment income and other income, and it excludes returns in the form of lower costs and other economic benefits.
Where interest rate hedge accounting is applied Sandvik is exposed to the STIBOR reference rate for hedged instruments together with their hedging instruments. The change of reference rate due to the upcoming IBOR transition will, when implemented, affect future cash flows on interest income and interest expense but Sandvik expects continued 100 percent effectiveness of the hedges and no net interest impact. The nominal value of outstanding exposures is SEK 1.5 billion. Sandvik will continue to monitor any changes to STIBOR as a reference rate and update, together with counterparties, the relevant financial contracts accordingly as and when these occur.
Other new or amended accounting standards and interpretations implemented during 2020 or that have been issued but are not yet in effect are not considered to have any material impact on Sandvik's financial statements.
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 contingent liabilities. The judgments and estimates discussed in notes where applicable 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.
The symbol and heading show where the estimates and judgments are described in each separate note.
| Other | Group | ||||||
|---|---|---|---|---|---|---|---|
| 2019 Revenue |
SMRT | SMM | SMT | operations | activities | Eliminations | Group total |
| External revenue | 44,777 | 41,123 | 15,279 | 2,059 | – | – | 103,238 |
| Internal revenue | 16 | 399 | 486 | 0 | – | -901 | – |
| Total | 44,793 | 41,522 | 15,766 | 2,059 | – | -901 | 103,238 |
| Share of results of associated companies | 9 | – | 0 | – | – | – | 9 |
| Operating profit (loss) by associated areas | 8,602 | 8,380 | 1,444 | -4,263 | -776 | – | 13,386 |
| Net financial items | – | – | – | – | – | – | -1,237 |
| Income tax expense for the year | – | – | – | – | – | – | -3,421 |
| Profit for the year | 8,617 | 8,318 | 1,436 | -4,268 | -780 | – | 8,728 |
| Other disclosures | |||||||
| Assets | 37,472 | 39,167 | 16,830 | 1,565 | 1,600 | – | 96,634 |
| Investments in associates | 103 | 189 | – | – | – | – | 292 |
| Total assets | 37,575 | 39,356 | 16,830 | 1,565 | 1,600 | – | 96,926 |
| Unallocated assets | – | – | – | – | – | – | 23,240 |
| Group total assets | – | – | – | – | – | – | 120,166 |
| Liabilities | 11,061 | 8,911 | 4,016 | 606 | 1,476 | 26,070 | |
| Unallocated liabilities | – | – | – | – | – | – | 32,187 |
| Group total liabilities | – | – | – | – | – | – | 58,258 |
| Capital expenditure | 857 | 2,284 | 687 | 75 | 233 | – | 4,136 |
| Depreciation/amortization | -1,694 | -2,646 | -861 | -300 | -203 | – | -5,704 |
| Impairment losses | -66 | -35 | -142 | -4,121 | – | – | -4,364 |
| Other non-cash expenses | -563 | 481 | -32 | -81 | 621 | – | 428 |
| Other | Group | ||||||
|---|---|---|---|---|---|---|---|
| 2020 | SMRT | SMM | SMT | operations | activities | Eliminations | Group total |
| Revenue | |||||||
| External revenue | 40,032 | 32,477 | 13,598 | 297 | – | – | 86,404 |
| Internal revenue | 9 | 323 | 327 | – | – | -659 | – |
| Total | 40,041 | 32,799 | 13,925 | 297 | – | -659 | 86,404 |
| Share of results of associated companies | 2 | 4 | – | – | – | – | 6 |
| Operating profit (loss) by associated areas | 7,389 | 4,606 | 492 | -578 | -694 | – | 11,216 |
| Net financial items | – | – | – | – | – | – | 54 |
| Income tax expense for the year | – | – | – | – | – | – | -2,517 |
| Profit for the year | 7,433 | 4,550 | 486 | -579 | -696 | – | 8,753 |
| Other disclosures | |||||||
| Assets | 34,411 | 37,980 | 15,125 | 84 | 1,446 | – | 89,046 |
| Investments in associates | 89 | 174 | – | – | 244 | – | 508 |
| Total assets | 34,500 | 38,153 | 15,125 | 84 | 1,691 | – | 89,554 |
| Unallocated assets | – | – | – | – | – | – | 29,460 |
| Group total assets | – | – | – | – | – | – | 119,014 |
| Liabilities | 10,856 | 8,748 | 3,804 | 115 | 1,072 | 24,594 | |
| Unallocated liabilities | – | – | – | – | – | – | 29,299 |
| Group total liabilities | – | – | – | – | – | – | 53,894 |
| Capital expenditure | -722 | -1,876 | -516 | 0 | -83 | – | -3,197 |
| Depreciation/amortization | -1,720 | -2,700 | -838 | -1 | -256 | – | -5,515 |
| Impairment losses | -286 | -116 | 48 | 2 | -98 | – | -450 |
| Other non-cash expenses | -802 | 918 | 383 | 507 | 16 | – | 1,022 |
All transactions between the business areas are on market terms. For information regarding business combinations, see note G31.
| Revenue by country | 2019 | 2020 |
|---|---|---|
| USA | 15,792 | 13,076 |
| Australia | 6,756 | 7,404 |
| China | 6,943 | 7,315 |
| Germany | 7,104 | 5,837 |
| Russia | 4,679 | 3,583 |
| Canada | 4,351 | 3,574 |
| Sweden | 3,596 | 3,259 |
| Italy | 3,827 | 2,943 |
| South Africa | 3,356 | 2,655 |
| UK | 3,889 | 2,515 |
| Mexico | 3,458 | 2,392 |
| France | 3,295 | 2,349 |
| India | 3,025 | 2,275 |
| Japan | 2,242 | 1,843 |
| Brazil | 1,713 | 1,454 |
| Indonesia | 2,111 | 1,406 |
| Austria | 1,238 | 1,117 |
| Ghana | 769 | 1,027 |
| Spain | 1,270 | 984 |
| Norway | 1,275 | 973 |
| Finland | 1,078 | 970 |
| Poland | 1,389 | 967 |
| Chile | 1,545 | 962 |
| Korea | 1,144 | 957 |
| Other countries | 17,393 | 14,567 |
| Total | 103,238 | 86,404 |
Revenue is specified by country based on where the customers are.
| Non-current assets by country | 2019 | 2020 |
|---|---|---|
| Sweden | 13,918 | 13,151 |
| USA | 7,380 | 8,964 |
| France | 4,556 | 4,330 |
| Germany | 4,124 | 3,904 |
| Austria | 2,642 | 2,524 |
| Finland | 2,344 | 2,213 |
| UK | 2,179 | 1,940 |
| China | 1,839 | 1,598 |
| India | 1,290 | 1,489 |
| Canada | 1,460 | 1,297 |
| Czech Republic | 940 | 980 |
| Australia | 897 | 857 |
| Italy | 641 | 664 |
| Japan | 656 | 581 |
| Netherlands | 396 | 370 |
| Other countries | 3,628 | 3,009 |
| Total | 48,888 | 47,871 |
Non-current assets are specified by country based on where the assets are located. Non-current assets consists of intangible assets, property, plant and equipment and right-of-use assets.
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' 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.
Segment information in accordance with IFRS8 is only provided for the Group.
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, 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 incomeand deferred tax receivables and payables, financial investments and financial liabilities.
| 2019 | 2020 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Other | Other | |||||||||
| Primary geographical markets | SMRT | SMM | SMT | operations | Group | SMRT | SMM | SMT | operations | Group |
| Europe | 6,989 | 22,102 | 8,562 | 275 | 37,928 | 6,016 | 17,432 | 6,553 | 42 | 30,043 |
| North America | 9,617 | 9,571 | 3,601 | 812 | 23,601 | 7,782 | 7,094 | 4,052 | 116 | 19,043 |
| South America | 4,154 | 838 | 205 | 71 | 5,267 | 2,979 | 588 | 346 | 7 | 3,920 |
| Africa and Middle East | 8,181 | 341 | 311 | 761 | 9,595 | 7,539 | 263 | 270 | 110 | 8,181 |
| Asia | 9,188 | 8,002 | 2,531 | 135 | 19,855 | 8,403 | 6,861 | 2,320 | 17 | 17,601 |
| Australia and New Zealand | 6,648 | 269 | 69 | 6 | 6,992 | 7,314 | 239 | 59 | 4 | 7,615 |
| Total | 44,777 | 41,123 | 15,279 | 2,059 | 103,238 | 40,032 | 32,477 | 13,598 | 297 | 86,404 |
| Major goods/service lines | ||||||||||
| Sale of goods | 40,835 | 40,460 | 15,219 | 1,671 | 98,185 | 36,594 | 31,905 | 13,523 | 236 | 82,259 |
| Rendering of services | 3,231 | 652 | 58 | – | 3,941 | 2,679 | 565 | 75 | – | 3,319 |
| Rental income | 707 | 4 | – | 388 | 1,099 | 753 | 3 | – | 60 | 815 |
| Other non product related revenue | 4 | 6 | 0 | – | 11 | 7 | 4 | 0 | – | 11 |
| Total | 44,777 | 41,123 | 15,279 | 2,059 | 103,238 | 40,032 | 32,477 | 13,598 | 297 | 86,404 |
| Major goods/service lines | ||||||||||
| Order backlog to be recognized as revenue after 2021 until 2022 |
300 | – | 1,482 | – | 1,782 | 436 | – | 891 | – | 1,327 |
Revenue is recognized when the control of goods and services is transferred to the customer at an amount reflecting the expected and entitled consideration for the goods or services provided. The supply of goods and services comprises metal cutting tools, mining equipment, stainless steels, furnaces, installation, support and maintenance.
The transaction price is allocated to each identified performance obligation on a relative stand-alone selling price basis. This means that each performance obligation will be allocated its share of revenue based on its stand-alone selling price put in relation to the sum of all performance obligation's stand-alone selling price. Adjusted market assessment approach and expected cost plus a margin approach are normally used to determine the stand-alone selling price if no observable selling price is available for one or more of the performance obligations. Variable consideration is generally allocated proportionally to all performance obligations unless there is evidence that the entire variable consideration is related to a specific performance obligation in the contract.
Customer contracts can include variable considerations such as cash discounts, rebates or right of returns. When such components are identified an assessment is made to determine if the identified portion of revenue and any related cost of goods sold should be deferred to a later period. This is established by applying the expected value method or the most likely amount method with the threshold of being highly probable that a reversal of revenue will not occur.
When advances are received, Sandvik adjusts the promised amount of consideration for the effects of the time value of money. Sandvik uses the practical expedient to not calculate and account for significant financing component if the period between the transfer of a good or service to a customer and payment is 12 months or less.
Contract asset for costs to obtain a contract is not recognized if the contract has a duration equal to or shorter than 12 months.
Revenue from goods sold (e.g. metal cutting tools, mining equipment, high value-added products in advance stainless steels and
§ special alloys, products for industrial heating) is recognized at a point in time when the control has been transferred to the customer. To assess when the control has been transferred, indicators such as, but not limited to: significant risks and rewards of ownership, transferred physical possession, the customer has accepted the asset, present right to payment and legal title of goods and services are considered. For sale of goods the transfer of control usually occurs when the significant risks and rewards are transferred in accordance to the Incoterms.
When goods sold are highly customized and there is an enforceable right to payment for performances completed to date, the goods are recognized over time. Progress of satisfaction of each performance obligation is used to measure the revenue by the proportion of cost incurred to date compared to estimated total cost of each performance obligation.
If a customer contract includes a buy-back clause, exercised at the customer discretion and a significant transfer of control has not taken place, the transaction is then accounted for as an operational lease in accordance with IFRS 16 Leases. If the customer is not considered to have a significant economic incentive to exercise the option, the contract is then accounted for by applying the principles of variable consideration.
Payment is generally due between 30–90 days from the transfer of control. In some contracts, short-term advances are required before the equipment is delivered. Some contracts contain right of return, late delivery penalties, volume rebates and trade-in, which give rise to variable consideration subject to constraint.
Revenue from service contracts (e.g. installation, support and maintenance) is recognized over time since the customer receives and consumes the benefits as it is being provided. Progress of satisfaction of each performance obligation is used to measure the revenue by the proportion of cost incurred to date compared to estimated total cost of each performance obligation. Service contracts where the value transferred to the customer directly corresponds to the invoiced amount is recognized according to the right to invoice.
Payment is generally due between 30–90 days after completion.
Revenue from licenses (e.g. automation and optimizations solutions) which are assessed to be separate performance obligations are recognized at point in time if the customer can use the license in its current functionality and no further updates or improvements are expected or required. If the customer has the right to access the license including future updates with improved functionality, the revenue from those licenses are recognized over time on a linear basis over the contract period.
| 2019 | 2020 | |||
|---|---|---|---|---|
| Number women | % | Number women | % | |
| Sweden | 8,997 | 24 | 8,311 | 24 |
| Rest of Europe | 14,041 | 19 | 12,867 | 19 |
| Total Europe | 23,038 | 21 | 21,179 | 21 |
| North America | 5,343 | 17 | 4,844 | 19 |
| South America | 1,782 | 16 | 1,737 | 16 |
| Africa, Middle East | 2,173 | 17 | 2,103 | 18 |
| Asia | 7,851 | 14 | 7,858 | 14 |
| Australia | 934 | 17 | 946 | 19 |
| Total | 41,120 | 19 | 38,666 | 19 |
| 2019 | 2020 | |
|---|---|---|
| Wages, salaries and other remuneration | 21,770 | 18,864 |
| Social costs | 5,613 | 5,064 |
| Total | 27,383 | 23,928 |
| of which, pension costs recognized in social costs | 1,612 | 1,649 |
A total of SEK 59 million (62) of the Group's pension costs relates to Boards and presidents. The Group's pension liability to these persons amounted to SEK 76 million (105).
| 2019 | 2020 | |
|---|---|---|
| Sweden | 5,533 | 4,624 |
| Rest of Europe | 8,351 | 7,180 |
| Total Europe | 13,884 | 11,804 |
| North America | 3,621 | 2,979 |
| South America | 401 | 414 |
| Africa, Middle East | 798 | 808 |
| Asia | 2,226 | 2,066 |
| Australia | 840 | 792 |
| Total | 21,770 | 18,864 |
| of which, to Boards of Directors and presidents | ||
| Salaries and other remuneration | 675 | 608 |
| of which, variable salary | 111 | 82 |
| Proportion of women, % | 2019 | 2020 |
|---|---|---|
| Gender distribution in senior management | 16 | 16 |
| Other senior executives | 25 | 25 |
The Board 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 2020 Annual General Meeting, the total fee to the external Board members elected at the Meeting amounts to in total SEK 6,690,000 on an annual basis. Of this amount SEK 2,550,000 is payable to the Chairman of the Board (Johan Molin) and SEK 690,000 to each of the other external Board members (Jennifer Allerton, Claes Boustedt, Marika Fredriksson, Johan Karlström, Helena Stjernholm and Kai Wärn).
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 SEK 640,000 to the members of the Audit Committee (Claes Boustedt SEK 300,000, Helena Stjernholm SEK 170,000 and Johan Molin SEK 170,000) and in an amount totaling SEK 375,000 to the members of the Remuneration Committee (Johan Molin SEK 145,000, Johan Karlström 115,000 and Helena Stjernholm SEK 115,000). No remuneration was paid to the members of the Acquisitions and Divestitures Committee. The long-term asset manager and largest shareholder of Sandvik shares, Industrivärden, granted in 2019 the Chairman of the Board one million call options over Sandvik shares with a five-year term and an exercise price of SEK 177. The options were purchased by the Chairman of the Board at market price.
For information on the current guidelines for remuneration of senior executives, adopted by the 2020 Annual General Meeting, please refer to pages 38–40.
Sandvik's President and CEO, Stefan Widing, was paid an annual fixed salary of SEK 11,159,393 and received the fringe-benefit value of a car provided by the company. In addition, an annual variable cash-based salary of maximum 75 percent of the fixed salary is payable. The variable salary for 2020 amounted to SEK 1,787,501. Stefan Widing is entitled to retire at age 65. A pension premium of 37.5 percent of his annual fixed salary is reserved annually. In the event of termination of employment by the company, Stefan Widing has a notice period of 12 months and 12 months' severance pay.
Other members of the Group Executive Management are covered by a Swedish pension plan (ITP1 or ITP2) and for one member a Swiss pension plan. The retirement age is minimum 62.
For members that are covered by the ITP plan 1 (defined contribution) a supplement of 5 percent of the salary portions in excess of 7.5 income base amounts may apply.
For members that are covered by the ITP Plan 2 (defined benefit), a supplementary defined-contribution plan applies under which the company each year contributes 25–33 percent (depending on age and employment start in GEM) of fixed salary portions in excess of 20 price base amounts. One member is covered by a Swiss pension plan under which 21 percent of fixed salary is contributed and whereof 75 percent is paid by the company and 25 percent by the employee.
Severance pay is paid 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 6–12 months. Any other income from employment may be deducted from the severance pay.
| Position | Fixed salary/ Board fee | Annual variable salary 1) Other benefits 2) Long-term variable salary 3) Pension costs 4) | |||
|---|---|---|---|---|---|
| Chairman of the Board | 2,865,0005) | – | – | – | – |
| Other Board Members | 4,840,0005) | – | – | – | – |
| President and CEO | 11,230,3266) | 1,787,501 | 90,007 | 0 | 4,469,080 |
| Former President and CEO | 3,712,3167) | 0 | 8,194 | 0 | 471,874 |
| Other Senior Executives 8) | 29,754,8599) | 4,536,867 | 544,311 | 6,179,976 | 11,663,108 |
| Total | 52,402,501 | 6,324,368 | 642,512 | 6,179,976 | 16,604,062 |
1) Amount pertaining to 2020 and expected to be paid in 2021.
2) Relates mainly to the fringe-benefit and company car.
3) The amounts pertain to changes in provisions made for the 2018, 2019 and 2020 LTI programs for the members of the Senior Management at year-end.
4) Amounts pertaining to company paid contributions.
5) Expensed during 2020.
6) The fixed salary during 2020 for Stefan Widing amounts to SEK 11,159,393 after the 10 percent base salary deduction (Apr – Dec) of SEK 975,001 made due to the Covid-19 pandemic. The remaining amount relates to vacation pay, etc. Board fees are not payable to President and CEO.
7) Björn Rosengren´s fixed salary 2020 amounts to SEK 1,258,250, the remaining amount relates to vacation pay, etc. Board fees are not payable to President and CEO. 8) Pertains to the following persons in 2020: Johan Kerstell, Tomas Eliasson, Jessica Alm, Åsa Thunman, Göran Björkman, Henrik Ager, Lars Bergström, Nadine Crauwels (Oct – Dec). 9) The temporary 10 percent base salary deduction due to the Covid-19 pandemic was also applicable for other Senior Executives.
| Position | Fixed salary/ Board fee | Annual variable salary 1) Other benefits 2) Long-term variable salary 3) | Pension costs | ||
|---|---|---|---|---|---|
| Chairman of the Board | 2,695,000 4) | – | – | – | – |
| Other Board members | 5,010,000 4) | – | – | – | – |
| President and CEO | 15,621,896 5) | 3,397,275 | 104,352 | 7,929,919 | 5,662,488 |
| Incoming President and CEO | 10,300,000 6) | – | – | – | – |
| Other senior executives 7) | 28,675,299 | 5,582,713 | 451,757 | 9,489,645 | 10,816,536 |
| Total | 62,302,195 | 8,979,988 | 556,109 | 17,419,564 | 16,479,024 |
1) Amount pertaining to 2019 and expected to be paid in 2020.
2) Relates mainly to the fringe-benefit and company car.
3) The amounts pertain to changes in provisions made for the 2017, 2018 and 2019 LTI programs for the members of the Senior Management at year-end.
4) Expensed during 2019.
5) Björn Rosengren's fixed salary 2019 amounts to SEK 15,099,000, the remaining amount relates to vacation pay, etc. Board fees are not payable to President and CEO 6) An agreement has been signed with the incoming President and CEO Stefan Widing on partial redemption of his existing long-term incentive program and for partially lost annual variable salary at the previous employer. Payment of SEK 10.3 million was made in 2019. The agreement also states that if Stefan Widing decides to leave Sandvik, on his own initia-
tive, before December 31, 2021 there is an obligation to reimburse 90 percent of the amount for the months remaining between his last working day and December 31, 2021. 7) Pertains to the following persons in 2019: Johan Kerstell, Tomas Eliasson, Jessica Alm, Åsa Thunman, Göran Björkman, Henrik Ager (Apr–Dec), Lars Bergström (Jul–Dec), Klas Forsström (Jan–Jun), Lars Engström (Jan–Mar).
The 2017–2020 Annual General Meetings approved the Board's proposal to adopt a performance share program for each year for maximum 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 at grant a maximum total of 4,853,793 shares.
All program participants have invested in Sandvik shares ("investment shares") up to an amount corresponding to 10 percent of their fixed annual pre-tax salary at the time of the investment.
In LTI 2017, each acquired investment share entitles participants to be allotted one Sandvik share ("matching share") after a period of three years, free of charge.
In LTI 2017–2020, provided certain performance targets are met, Sandvik shares ("performances shares") may be allotted. 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 2017–2020, respectively, the Board of Directors established the levels regarding adjusted EPS for the performance year in question that had to be attained for allotment of a certain number of performance shares.
LTI 2017: Matching shares were allotted during 2020. Performance shares were also allotted since the performance targets set by the Board of Directors were met. Adjusted EPS for the financial year 2017 amounted to SEK 7.99.
LTI 2018: Performance shares will be allotted since the performance targets set by the Board of Directors were met. The adjusted EPS for the financial year 2018 amounted to SEK 10.58. LTI 2019: Performance shares will partly be allotted since the performance targets set by the Board of Directors were partly met. The adjusted EPS for the financial year 2019 amounted to SEK 11.20.
LTI 2020: No performance shares will be allotted since the performance targets set by the Board of Directors were not met. Adjusted EPS for the financial year 2020 amounted to SEK 8.74. This means that there will be no allotment of shares under LTI 2020.
The number of allotted shares (matching shares under the 2017 LTI program and performance shares under the 2017–2020 LTI programs) for the President and other members of the Group Executive Management on Dec 31, 2020 corresponds to the number of outstanding performance shares and matching shares at year-end.
The allotments of performance shares in LTI 2018 and LTI 2019 programs requires continuous employment and that all investment shares are held during a period of three years from the acquisition of the investment shares.
The following IFRS 2 provisions were established during the year: For LTI 2020 no IFRS 2 provisions were made during 2020 since
the performance targets set by the Board of Directors were not met, For LTI 2019 SEK 10,4 million (excluding social costs), of which
SEK 1,4 million for the other senior executives. For LTI 2018 SEK 28,2 million (excluding social costs), of which SEK 4,8 million for the other senior executives.
The President did not participate in LTI 2019 or LTI 2018, thus there are no provisions established during the year.
The employee 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 matching shares and performance shares.
The Board's Remuneration Committee prepares issues relating to the Group Executive Management's remuneration. The Committee met two times during the year. Issues dealt with included the distribution between fixed and variable salary, the magnitude of any pay increases and the long-term variable incentive program.
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 2020. 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 2017 (on date of issue) |
Program 2018 (on date of issue) |
Program 2019 (on date of issue) |
Program 2020 (on date of issue) |
|---|---|---|---|---|
| Share price, SEK | 137.00 | 162.90 | 153.00 | 142.25 |
| Present value of forecasted future dividends, SEK 1) | 10.55 | 12.70 | 14.81 | 15.75 |
| Risk-free interest rate, % | -0.46 | -0.41 | -0.49 | -0.31 |
1) Based on analysts' 3 year combined expectations.
| Performance shares | Matching shares | Performance shares | Performance shares | Performance shares | |
|---|---|---|---|---|---|
| 2017 | 2017 | 2018 | 2019 | 2020 | |
| Outstanding at beginning of year | 1,007,694 | 223,472 | 1,202,528 | 428,813 | – |
| Allotted during the period | – | – | – | – | 587,417 |
| Vested during the year | -906,377 | -209,141 | -26,424 | – | – |
| Forfeited during the year | -101,317 | -14,331 | -186,359 | -58,758 | -587,417 |
| Outstanding at year-end | – | – | 989,745 | 370,055 | – |
| Theoretical value when allotted acc. to Black-Scholes, SEK |
126.40 | 126.40 | 150.10 | 138.19 | 126.40 |
| Performance shares 2017 |
Matching shares 2017 |
Performance shares 2018 |
Performance shares 2019 |
Performance shares 2020 |
|
|---|---|---|---|---|---|
| Outstanding at beginning of year | 191,382 | 35,098 | 194,341 | 61,508 | – |
| Allotted during the period | – | – | – | – | 93,639 |
| Vested during the year | -130,954 | -28,314 | -26,424 | – | – |
| Forfeited during the year | -60,428 | -6,784 | -87,342 | -25,273 | -93,639 |
| Transferred during the year | – | – | 41,756 | 3,183 | – |
| Outstanding at year-end | – | – | 122,331 | 39,418 | – |
| Theoretical value when allotted acc. to Black-Scholes, SEK |
126.40 | 126.40 | 150.10 | 138.19 | 126.40 |
Share-based payments refer to remuneration to employees in accordance with employee share saving programs.
The share-based programs include two types of rights. Matching share rights provide entitlement to shares in Sandvik if the participant 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 shares vested.
In order to meet its commitments under the share saving 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 sharebased 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.
Fees and remuneration to the Group's auditors were as follows:
| 2019 | 2020 | |
|---|---|---|
| PwC | ||
| Audit fees | -82 | -83 |
| Audit activities other than the audit assignment | 0 | 0 |
| Tax consultancy services | -6 | -6 |
| Other services | -23 | -22 |
| Total | -111 | -111 |
| Other Audit firms | ||
| Audit fees | -10 | -10 |
| Audit activities other than the audit assignment | 0 | 0 |
| Tax consultancy services | -36 | -37 |
| Other services | -124 | -48 |
| Total | -170 | -95 |
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 other assurance, advice on accounting issues and due-diligence services in connection with acquisitions.
| 2019 | 2020 | |
|---|---|---|
| Expenditure for | ||
| Research and development | -3,872 | -3,604 |
| Quality assurance | -475 | -243 |
| Total | -4,347 | -3,847 |
| of which expensed, total | -4,149 | -3,672 |
| of which expensed relating to research and | ||
| development | -3,674 | -3,429 |
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 SEK 473 million (1,184). The amount is mainly related to realized hedges of SEK 169 million and profit from foreign exchange of SEK 96 million.
For 2019 the amount is mainly related to currency exchange gain from operating receivables and liabilities of SEK 550 million and legal settlements/ penalties of SEK 100 million.
Other operating expenses amounted to SEK -1,858 million (-4,119). The main parts are currency exchange loss from operating receivables and liabilities of SEK -360 million, impairment of goodwill of SEK -304 million and other items with currency components of SEK -784 million.
For 2019 the main parts are impairment on goodwill related to Varel of SEK -2,776 million and currency exchange loss from derivatives and other items with currency components of SEK -800 million.
| 2019 | 2020 | |
|---|---|---|
| Cost of goods and material | -33,104 | -28,099 |
| Employee benefit expense | -27,383 | -23,928 |
| Depreciation and amortization | -5,704 | -5,515 |
| Impairment losses, inventories | -215 | -270 |
| Impairment losses and reversal impairment losses, | ||
| non-current assets | -4,364 | -450 |
| Impairment losses, doubtful receivables | -74 | -102 |
| Other expenses | -20,201 | -17,305 |
| Total | -91,045 | -75,668 |
Other expenses mainly relate to purchases of services and consumables.
| 2019 | 2020 | |
|---|---|---|
| Interest income | 356 | 335 |
| Dividend | 20 | 5 |
| Other investments including derivatives | ||
| Net gain on remeasurements of financial assets/liabilities |
80 | 195 |
| Gain from disposal of financial asset | - | 599 |
| Other financial income | 37 | 30 |
| Financial income | 492 | 1,163 |
| Interest expense | -1,405 | -1,001 |
| Other investments including derivatives | ||
| Net loss on remeasurements of financial assets/liabilities |
-236 | -10 |
| Foreign-exchange losses | -4 | -5 |
| Other financial expenses | -85 | -96 |
| Financial expenses | -1,729 | -1,110 |
| Net financial items | -1,237 | 54 |
Net interest income/expense from financial assets and liabilities not measured at fair value through profit or loss amounted to SEK -666 million (-1,049). No inefficiencies in cash flow hedges impacted profit for the year (0). For further information regarding valuation policies for financial instruments, refer to note G28.
Financial expenses consist 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.
| Total tax expense | -3,421 | -2,517 |
|---|---|---|
| Deferred taxes relating to temporary differences and tax losses carried forward |
596 | 666 |
| Total current tax expense | -4,017 | -3,183 |
| Adjustment of taxes attributable to prior years | 95 | 190 |
| Current tax | -4,112 | -3,373 |
| Income tax expense for the year | 2019 | 2020 |
The Group's recognized tax expense for the continuing operations for the year amounted to SEK 2,517 million (3,421) or 22.3 percent (28.2) of profit after net 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 21.9 percent (22.6). The tax rate in Sweden is 21.4 percent (21.4). Reconciliation of the Group's weighted average tax rate, based on the tax rates in each country, and the Group's actual tax expense:
| 2019 | 2020 | |||
|---|---|---|---|---|
| MSEK | % | MSEK | % | |
| Profit after net financial items | 12,150 | 11,270 | ||
| Weighted average tax based on each country's tax rate |
-2,744 | -22.6 | -2,469 | -21.9 |
| Tax effect of | ||||
| Non-deductible expenses | -767 | -6.3 | -231 | -2.0 |
| Tax-exempt income | 31 | 0.2 | 48 | 0.4 |
| Adjustments relating to prior years | 95 | 0.8 | 190 | 1.7 |
| Effects of tax losses carried forward, net | 13 | 0.1 | -20 | -0.2 |
| Other | -49 | -0.4 | -35 | -0.3 |
| Total recognized tax expense | -3,421 | -28.2 | -2,517 | -22.3 |
| 2019 | 2020 | |||||
|---|---|---|---|---|---|---|
| Before tax | Tax | After tax | Before tax | Tax | After tax | |
| Actuarial gains (losses) attributable to defined-benefit pension plans | -1,638 | 323 | -1,315 | -1,146 | 225 | -921 |
| Translation differences for the year | 1,880 | – | 1,880 | -4,754 | – | -4,754 |
| Fair-value changes in cash flow hedges for the year | 30 | -9 | 21 | 28 | -8 | 20 |
| Fair-value changes in cash flow hedges carried forward to profit (loss) for the year | -2 | 1 | -1 | 0 | 0 | 0 |
| Other comprehensive income | 270 | 315 | 585 | -5,872 | 217 | -5,655 |
The deferred tax assets and liabilities recognized in the balance sheet are attributable to the following assets and liabilities.
| 2019 | 2020 | |||||
|---|---|---|---|---|---|---|
| Deferred tax assets |
Deferred tax liabilities |
Net | Deferred tax assets |
Deferred tax liabilities |
Net | |
| Intangible assets | 184 | -1,466 | -1,282 | 197 | -1,445 | -1,248 |
| Property, plant and equipment | 250 | -1,612 | -1,362 | 200 | -1,475 | -1,275 |
| Financial non-current assets | 184 | -149 | 35 | 173 | -129 | 44 |
| Inventories | 961 | -94 | 867 | 853 | -52 | 801 |
| Receivables | 170 | -107 | 63 | 122 | -91 | 31 |
| Interest-bearing liabilities1) | 1,632 | 0 | 1,632 | 1,851 | -6 | 1,845 |
| Non-interest-bearing liabilities2) | 1,304 | -26 | 1,278 | 1,446 | -28 | 1,418 |
| Other | 15 | – | 15 | 17 | – | 17 |
| Tax losses carried forward | 252 | – | 252 | 386 | – | 386 |
| Interest expenses carried forward | – | – | – | 20 | – | 20 |
| Total | 4,952 | -3,454 | 1,498 | 5,265 | -3,226 | 2,039 |
| Offsetting within companies | -1,155 | 1,155 | – | -1,167 | 1,167 | – |
| Total deferred tax assets and liabilities | 3,797 | -2,299 | 1,498 | 4,098 | -2,059 | 2,039 |
1) Mainly related to pensions.
2) Mainly related to provisions.
The Group has additional tax losses carried forward of SEK 2,195 million (2,595). The main part of the change for 2020 relates to revaluation and expiry of tax losses in prior years in Brazil, Chile and China. No deferred tax asset was recognized for these losses.
The expiry dates of these tax losses carried forward are distributed as follows:
| Year | MSEK |
|---|---|
| 2021 | 77 |
| 2022 | 22 |
| 2023 | 35 |
| 2024 | 17 |
| 2025 | 40 |
| No expiry date | 2,004 |
| Total | 2,195 |
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 losses carried forward amounted to SEK 639 million (750).
| 2019 | 2020 | |
|---|---|---|
| Balance at the beginning of the year, net | 765 | 1,498 |
| Recognized in profit and loss | 596 | 666 |
| Acquisitions/disposals of subsidiaries | -146 | -202 |
| Recognized in other comprehensive income | 315 | 217 |
| Translation differences | 44 | -136 |
| Reclassifications | -76 | -4 |
| Balance at end of year, net | 1,498 | 2,039 |
In addition to the deferred tax assets and liabilities, Sandvik reports the following tax liabilities and receivables:
| 2019 | 2020 | |
|---|---|---|
| Income tax liabilities | -3,744 | -2,695 |
| Income tax receivables | 1,403 | 676 |
| Net tax liabilities/receivables | -2,341 | -2,019 |
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 to 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 and intends to do so.
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 losses carried forward are recognized only to the extent that it is probable they can be utilized against future taxable profits.
Significant estimates are made to determine both current and deferred tax liabilities/assets, not least the value of deferred tax assets.
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.
The recognized provision for ongoing tax litigations and other uncertainties amounted to SEK 1,267 million (1,454) and is as previously based on management´s best estimate of the outcome.
| Basic | Diluted | |||
|---|---|---|---|---|
| 2019 | 2020 | 2019 | 2020 | |
| Earnings per share, group total | 6.81 | 6.96 | 6.79 | 6.95 |
| Earnings per share, continuing operations |
6.97 | 6.99 | 6.96 | 6.98 |
The calculation of the numerators and denominators used in the above calculations of earnings per share is presented below.
| 2019 | 2020 | |
|---|---|---|
| Profit for the year attributable to the owners of | ||
| the Parent Company, group total | 8,539 | 8,735 |
| Profit for the year attributable to owners of the | ||
| Parent Company, continuing operations | 8,744 | 8,767 |
The calculation of earnings per share is based on the profit for the year attributable to the equity holders of the Parent Company divided by the weighted average numbers of shares outstanding during the year. The earnings per share is calculated both for the group total as well as for the continuing operations.
| In thousands of shares | 2019 | 2020 |
|---|---|---|
| Total number of ordinary shares at January 1 | 1,254,386 1,254,386 | |
| Weighted average number of shares outstanding during the year, basic |
1,254,386 1,254,386 |
The calculation of diluted earnings per share is based on the profit for the year attributable to the equity holders of the Parent Company divided by the weighted average numbers of shares outstanding during the year, diluted. The earnings per share is calculated both for the group total as well as for the continuing operations.
| In thousands of shares | 2019 | 2020 |
|---|---|---|
| Total number of ordinary shares at January 1 | 1,254,386 1,254,386 | |
| Effect of share options | 2,580 | 1,669 |
| Weighted average number of shares outstanding during the year, diluted |
1,256,965 1,256,055 |
Diluted earnings per share is related to outstanding share-based LTI programs for 2018 and 2019. For LTI program for 2020 no performance shares will be allotted since the performance targets set by the Board of Directors were not met. Further information about the LTI programs are found in note G4.
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 share-based payment arrangements issued to employees. The shared-based awards are dilutive if the exercise price is less than the quoted stock price and increases with the size of the difference.
| Internally generated intangible assets | Acquired intangible assets | Total | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Capital | Capital | Patents, | ||||||||||
| ized R&D | Patents, | ized R&D | licenses, | |||||||||
| expendi | IT | and | expendi | IT | trade | |||||||
| ture | software | licenses Other Subtotal | ture | software | marks etc. Goodwill Other Subtotal | |||||||
| Cost | ||||||||||||
| At January 1, 2019 | 4,009 | 3,022 | 227 | 132 | 7,389 | 476 | 937 | 2,296 | 15,605 3,412 22,727 30,116 | |||
| Additions | 203 | 313 | 9 | 7 | 533 | 29 | 81 | 20 | 156 | 2 | 289 | 822 |
| Business combinations Divestments and disposals |
– -129 |
– -320 |
15 -3 |
– -3 |
15 -456 |
-6 -24 |
0 -126 |
312 -1,196 |
917 | 464 -5 -916 |
1,687 | 1,703 -2,268 -2,723 |
| Reclassifications | -8 | -1 | 4 | 23 | 19 | – | 19 | 0 | – | -4 | 15 | 34 |
| Translation differences for the year | 26 | 24 | 4 | 3 | 57 | 7 | 10 | 81 | 561 | 114 | 774 | 831 |
| At December 31, 2019 | 4,101 | 3,038 | 257 | 163 | 7,558 | 482 | 921 | 1,514 | 17,233 3,073 23,224 30,782 | |||
| Accumulated amortizations and impairment losses | ||||||||||||
| At January 1, 2019 | 2,660 | 1,637 | 106 | 106 | 4,508 | 110 | 637 | 950 | – 1,661 | 3,357 | 7,866 | |
| Business combinations | – | – | 3 | – | 3 | – | 0 | – | – | 5 | 5 | 9 |
| Divestments and disposals | -112 | -312 | 2 | -3 | -425 | -9 | -109 | -1,196 | – -915 | -2,229 -2,653 | ||
| Impairment losses | 52 | 10 | – | – | 62 | – | 10 | 839 | 2,853 | 436 | 4,138 | 4,200 |
| Reclassification | -6 | 6 | 14 | 4 | 17 | 0 | 7 | 0 | – | -11 | -4 | 14 |
| Amortizations for the year | 333 | 321 | 14 | 5 | 673 | 58 | 75 | 120 | – | 281 | 534 | 1,207 |
| Translation differences for the year | 14 | 6 | 2 | 3 | 25 | 1 | 8 | -6 | – | 39 | 42 | 66 |
| At December 31, 2019 | 2,940 | 1,668 | 140 | 116 | 4,863 | 160 | 629 | 706 | 2,853 1,496 | 5,844 10,708 | ||
| Net carrying amount | ||||||||||||
| At December 31, 2019 | 1,161 | 1,370 | 117 | 47 | 2,694 | 322 | 292 | 807 | 14,380 1,577 17,381 20,074 | |||
| Cost | ||||||||||||
| At January 1, 2020 | 4,101 | 3,038 | 257 | 163 | 7,558 | 482 | 921 | 1,514 | 17,233 3,073 23,224 30,782 | |||
| Additions | 175 | 222 | 9 | 0 | 405 | 32 | 69 | 7 | -2 | 3 | 109 | 514 |
| Business combinations | – | – | – | – | – | – | 3 | 269 | 1,788 1,043 | 3,103 | 3,103 | |
| Divestments and disposals | -76 | -192 | -9 | -1 | -279 | 0 | -37 | -65 | -2,853 | -50 | -3,005 -3,284 | |
| Reclassifications | 0 | -58 | 11 | – | -46 | 0 | 78 | -11 | – | 10 | 77 | 31 |
| Translation differences for the year | -86 | -23 | -13 | -13 | -135 | -22 | -34 | -64 | -948 -195 | -1,264 -1,399 | ||
| At December 31, 2020 | 4,114 | 2,987 | 255 | 148 | 7,503 | 492 | 1,001 | 1,648 | 15,217 3,884 22,244 29,747 | |||
| Accumulated amortizations and impairment losses | ||||||||||||
| At January 1, 2020 | 2,940 | 1,668 | 140 | 116 | 4,863 | 160 | 629 | 706 | 2,853 1,496 | 5,844 10,708 | ||
| Business combinations | – | – | – | – | – | – | 3 | – | – | – | 3 | 3 |
| Divestments and disposals | -22 | -173 | -7 | 0 | -202 | 0 | -32 | -66 | -2,853 | -50 | -3,000 -3,203 | |
| Impairment losses | 41 | 51 | – | – | 92 | 0 | 1 | 0 | 304 | 0 | 305 | 396 |
| Reclassifications | -2 | -53 | 5 | 0 | -50 | 0 | 2 | -9 | – | 5 | -2 | -52 |
| Amortization for the year | 287 | 385 | 12 | 10 | 694 | 40 | 69 | 90 | – | 200 | 399 | 1,092 |
| Translation differences for the year | -54 | -13 | -7 | -12 | -86 | -9 | -27 | 3 | – | -82 | -115 | -200 |
| At December 31, 2020 | 3,189 | 1,866 | 143 | 114 | 5,310 | 191 | 644 | 725 | 304 1,569 | 3,433 | 8,743 | |
| Net carrying amount | ||||||||||||
| At December 31, 2020 | 925 | 1,121 | 112 | 34 | 2,193 | 301 | 357 | 923 | 14,913 2,315 18,811 21,004 |
| Total | -1,207 | -1,092 |
|---|---|---|
| Research & development | -391 | -345 |
| Administrative expenses | -629 | -585 |
| Selling expenses | -47 | -39 |
| Cost of sales | -140 | -123 |
| 2019 | 2020 |
| 2019 | 2020 | |
|---|---|---|
| Cost of sales | -16 | -1 |
| Selling expenses | -1,276 | 0 |
| Administrative expenses | -1 | -1 |
| Research & development | -53 | -91 |
| Other operating expenses | -2,853 | -304 |
| Total | -4,200 | -396 |
Intangible assets with a definite useful life were tested for impairment when an indication for impairment was identified. Intangible assets with an indefinite useful life were tested for impairment annually and whenever events or changes in circumstances indicate that the carrying amount has been impaired, The tests resulted in impairment losses of SEK 396 million (4,200).
| Carrying amount | ||
|---|---|---|
| Goodwill by cash-generating unit | 2019 | 2020 |
| Sandvik Manufacturing and Machining Solutions | ||
| Walter | 1,124 | 1,119 |
| Seco Tools | 423 | 442 |
| Sandvik Coromant | 621 | 2,2671) |
| Dormer Pramet | 131 | 3201) |
| Business area level | 5,274 2) | 4,787 |
| Total | 7,573 | 8,937 |
| Sandvik Mining and Rock Technology | ||
| Business area level | 5,441 | 4,706 |
| Total | 5,441 | 4,706 |
| Sandvik Materials Technology | ||
| Business area level | 1,324 | 1,234 |
| Total | 1,324 | 1,234 |
| Other operations | 42 | 36 |
| Group total | 14,380 | 14,913 |
1) In 2020 Sandvik Coromant and Dormer Pramet are new CGUs and have been separated from business area level SMM.
2) In 2020, CGU Metrologic and Wolfram are included in business area level SMM but were own CGUs in 2019. Metrologic amounted to SEK 2,544 million and Wolfram amounted to SEK 1,595 million in 2019.
As stated below, the carrying amount of goodwill in the consolidated balance sheet is SEK 14,913 million (14,380), essentially related to a number of major business combinations. During 2020, Sandvik redefined the cash-generating units (CGUs) within the business area Sandvik Manufacturing and Machining Solutions. In the previous year the following CGUs were applied: Walter, Seco Tools, Wolfram and Sandvik Manufacturing and Machining Solutions business area level. The new CGUs for which impairment tests have been performed are Sandvik Coromant, Seco Tools, Dormer Pramet, Walter and Sandvik Manufacturing and Machining Solutions business area level. Sandvik has redefined the CGUs to reflect the core divisions, which are all competing brands with separate operations and cash flows. The other divisions (Wolfram, Applied Manufacturing Technologies and Additive Manufacturing) are tested within the SMM business area level, as their purpose is to support and/or generate synergies with the core divisions. For the business areas Sandvik Mining and Rock Technology and Sandvik Materials Technology, respectively, the CGUs are unchanged, which means that goodwill is tested for impairment at the business area level. Consolidated goodwill is allocated to the CGUs stated above. The recoverable amount of all of the CGUs has been assessed based on estimates of value in use. Calculations of value in use are based on the estimated future cash flows using forecasts covering a four-year period, which are 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 assumptions mentioned below reflect past experience and are consistent with external information. The most material assumptions when determining the value in use include anticipated demand, growth rate, operating margin, working capital requirements and the discount rate.
The factor used to calculate growth in the terminal period after four years was 2 percent for Seco Tools (2), Walter (2), Sandvik Coromant (not applicable last year), Dormer Pramet (not applicable last year), Sandvik Manufacturing and Machining Solutions business area level (2), Sandvik Materials Technology business area level (2) and 3 percent for Sandvik Mining and Rock Technology business area level (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. Since 2020 Sandvik calculates a pretax discount rate for each CGU, which varied between 10.1 and 12.6 percent; Sandvik Mining and Rock Technology 12.6 percent, Sandvik Manufacturing and Machining Solutions 10.1 percent, Sandvik Coromant 11.7 percent, Seco Tools 10.6 percent, Dormer Pramet 10.5 percent, Walter 11.1 percent and Sandvik Materials Technology 10.2 percent. Last year all CGUs applied a pre-tax discount rate of 10 percent before tax. The specific risks of the CGUs have been adjusted for in the future cash flow forecasts.
Goodwill attributable to the Sandvik Mining and Rock Technology business area amounting to SEK 304 million was written down in the second quarter due to an expected closure of smaller business. The cost is booked in other operating income and expenses. For more information, see note G32.
The impairment testing of goodwill performed during 2020 did not indicate any other impairment requirements. Sensitivity in the calculations implies that the goodwill value would be maintained even if the discount rate was increased by 2 percentage points or if the long-term growth rate was lowered by 2 percentage points. The goodwill value would also be maintained, given an operating margin drop by 2 percentage points.
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 and is reported as an indefinite useful life intangible asset. Goodwill is allocated to CGUs that are expected to benefit from the synergies of the business combination. 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 straightline 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.
| – Patents | 10–20 years |
|---|---|
| – Trademarks | 10-20 years and some |
| with indefinite useful life | |
| – Customer relationships | 10 years |
| – Capitalized development costs | 3–10 years |
| – Software for IT operations | 3 years |
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 CGU to which the asset belongs.
In respect to 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 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 time period to get ready for its intended use or sale. The Group considers a period in excess of one year to be a substantial time period. For the Group, the capitalization of borrowing costs relating to intangibles is mainly relevant for capitalized expenditure for the development of new data systems.
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 CGU 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. 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 intangible assets – excluding goodwill and certain trademarks– are stated at cost less accumulated amortization and any impairment losses. Other than goodwill and certain trademarks, Sandvik has not identified any intangible assets with indefinite useful lives. The assets are 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 CGU to which the asset belongs.
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 costs to sell.
| Land and buildings | Plant and machinery |
Equipment, tools, fixtures and fittings |
Construction in progress |
Total | |
|---|---|---|---|---|---|
| Cost | |||||
| At January 1, 2019 | 17,418 | 42,067 | 6,591 | 2,786 | 68,862 |
| Additions | 208 | 1,692 | 349 | 2,082 | 4,332 |
| Business combinations | 4 | 178 | 14 | – | 196 |
| Divestments and disposals | -430 | -1,975 | -479 | -130 | -3,013 |
| Reclassifications | 127 | 570 | 280 | -2,105 | -1,128 |
| Translation differences for the year | 278 | 637 | 109 | 24 | 1,048 |
| At December 31, 2019 | 17,605 | 43,169 | 6,865 | 2,657 | 70,296 |
| Accumulated depreciations and impairment losses | |||||
| At January 1, 2019 | 8,330 | 30,188 | 5,012 | – | 43,529 |
| Business combinations | 1 | 104 | 10 | – | 115 |
| Divestments and disposals | -339 | -1,740 | -439 | – | -2,518 |
| Impairment losses | 25 | 310 | 1 | – | 335 |
| Reversal of impairment losses | -15 | -14 | – | – | -29 |
| Reclassifications | -80 | -928 | 10 | – | -997 |
| Depreciation for the year | 545 | 2,575 | 435 | – | 3,554 |
| Translation differences for the year | 127 | 452 | 84 | – | 664 |
| At December 31, 2019 | 8,593 | 30,947 | 5,113 | – | 44,653 |
| Net carrying amount | |||||
| At December 31, 2019 | 9,012 | 12,222 | 1,752 | 2,657 | 25,643 |
| Cost | |||||
| At January 1, 2020 | 17,605 | 43,169 | 6,865 | 2,657 | 70,296 |
| Additions | 251 | 1,364 | 221 | 1,739 | 3,576 |
| Business combinations | 27 | 357 | 39 | 2 | 425 |
| Divestments and disposals | -282 | -1,706 | -356 | -151 | -2,495 |
| Reclassifications | 307 | 431 | 82 | -1,665 | -845 |
| Translation differences for the year | -815 | -1,984 | -331 | -124 | -3,254 |
| At December 31, 2020 | 17,093 | 41,631 | 6,520 | 2,458 | 67,702 |
| Accumulated depreciations and impairment losses | |||||
| At January1, 2020 | 8,593 | 30,947 | 5,113 | – | 44,653 |
| Business combinations | 9 | 188 | 26 | – | 223 |
| Divestments and disposals | -201 | -1,420 | -338 | – | -1,959 |
| Impairment losses | 122 | 94 | 5 | – | 222 |
| Reversal of impairment losses | -45 | -65 | – | – | -111 |
| Reclassifications | -7 | -566 | -91 | – | -665 |
| Depreciation for the year | 542 | 2,473 | 426 | – | 3,442 |
| Translation differences for the year | -396 | -1,435 | -248 | – | -2,079 |
| At December 31, 2020 | 8,616 | 30,217 | 4,894 | – | 43,727 |
| Net carrying amount | |||||
| At 31 December 31, 2020 | 8,477 | 11,414 | 1,626 | 2,458 | 23,975 |
| 2019 | 2020 | |
|---|---|---|
| Cost of sales | -306 | 9 |
| Administrative expenses | 0 | -96 |
| Research & development | 0 | -25 |
| Total | -306 | -112 |
Property, plant and equipment with a definite useful life were tested for impairment when an indication for impairment was identified. The tests resulted in impairment losses of SEK 112 million (306).
Items of property, plant and equipment totaling SEK 225 million (234) have been pledged as security for liabilities. In 2020, contractual commitments for the acquisition of property, plant and equipment amounted to SEK 265 million (385).
Property, plant and equipment are recognized at cost less accumulated depreciation and any impairment losses.
Property, plant and equipment are depreciated over their estimated useful lives. Land is not depreciated. Depreciation is recognized on a straight-line basis (unless otherwise described) based on the cost of the assets, adjusted by residual value when applicable, and estimated useful lives. The following depreciation periods are applied.
– Buildings 10–50 years
– Plant and machinery 5–10 years – Rental assets 3 years
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.
Impairment and reversals of impairment is applicable also for property, plant and equipment. For details see section in note G13.
For definition of borrowing costs see section in intangible assets note G13. The capitalization of borrowing costs relating to tangibles is mainly relevant for the construction of production buildings on a proprietary basis.
Sandvik's tangible assets are stated at cost less accumulated depreciation and any impairment losses. The assets are depreciated 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 rental fleets of Sandvik Mining and Rock Technology 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 canceled. The carrying amount of the rental fleets at the end of 2020 was SEK 983 million (1,071).
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 costs to sell.
| Land and buildings | Plant and machinery | Fixture and fittings | Total | |
|---|---|---|---|---|
| Accumulated acquisition cost | ||||
| Opening balance adjustment at January 1, 2019 | 2,539 | 295 | 554 | 3,389 |
| Additions | 351 | 83 | 297 | 730 |
| Remeasurements | 66 | 10 | 9 | 86 |
| Business combinations | 21 | – | – | 21 |
| Divestments and disposals | -49 | -1 | -11 | -61 |
| Reclassifications | -11 | 3 | 3 | -5 |
| Translation differences for the year | 58 | 3 | 13 | 72 |
| Transfer asset held for sale | -73 | -19 | -2 | -94 |
| At December 31, 2019 | 2,902 | 374 | 864 | 4,137 |
| Depreciation and impairment losses | ||||
| Depreciation for the year | 608 | 106 | 275 | 989 |
| Impairment losses | 17 | 6 | 0 | 23 |
| Divestments and disposals | -2 | 1 | -6 | -7 |
| Reclassifications | -3 | -1 | 9 | 5 |
| Translation differences for the year | -4 | -1 | -3 | -7 |
| Transfer asset held for sale | -27 | -8 | -1 | -36 |
| At December 31, 2019 | 589 | 103 | 274 | 966 |
| Net carrying amount | ||||
| At December 31, 2019 | 2,313 | 271 | 590 | 3,172 |
| Accumulated acquisition cost | ||||
| At January 1, 2020 | 2,902 | 374 | 864 | 4,137 |
| Additions | 431 | 94 | 227 | 753 |
| Remeasurements | 214 | -10 | 11 | 215 |
| Business combinations | 26 | 0 | 0 | 26 |
| Divestments and disposals | -197 | -51 | -107 | -355 |
| Reclassifications | 2 | -54 | 56 | 3 |
| Translation differences for the year | -187 | -8 | -60 | -257 |
| At December 31, 2020 | 3,190 | 345 | 990 | 4,523 |
| Depreciation and impairment losses | ||||
| At January 1, 2020 | 589 | 103 | 274 | 966 |
| Depreciation for the year | 541 | 127 | 320 | 987 |
| Impairment losses | 0 | 4 | 0 | 5 |
| Reversal of impairment losses | -3 | 0 | 0 | -3 |
| Divestments and disposals | -82 | -43 | -97 | -222 |
| Reclassifications | -5 | -26 | 22 | -8 |
| Translation differences for the year | -57 | -4 | -31 | -92 |
| At December 31, 2020 | 983 | 159 | 489 | 1,632 |
| Net carrying amount | ||||
| At December 31, 2020 | 2,207 | 185 | 501 | 2,891 |
| Depreciation per line in the income statement | 2019 | 2020 |
|---|---|---|
| Cost of goods sold | -277 | -300 |
| Selling expenses | -298 | -255 |
| Administrative expenses | -375 | -355 |
| Research and Development expenses | -39 | -79 |
| Total | -989 | -987 |
Impairment losses/reversal of impairment losses per line in the income statement
| 2019 | 2020 | |
|---|---|---|
| Cost of goods sold | -23 | 3 |
| Selling expenses | -0 | -4 |
| Total | -23 | -1 |
| 2019 | 2020 | |
|---|---|---|
| Depreciations for the year | -989 | -987 |
| Impairment losses/reversal of impairment losses | -23 | -2 |
| Interest expenses related to lease liabilities | -111 | -104 |
| Expenses for low value assets | -80 | -51 |
| Expenses for short-term leases | -42 | -49 |
| Expenses related to variable lease expenses not included in the lease liability |
-4 | -3 |
| Gains/losses related to sale and leaseback | ||
| transactions | -0 | -1 |
| Total amounts recognized in the income | ||
| statement | -1,249 | -1,197 |
| The total cash outflow for leases during the year | -1,071 | -1,118 |
Contracts not yet commenced amounted to SEK 111 million (27). For maturity analysis of the lease liability, see note G28.
The Group's investments in financial leases amounted to SEK 3,751 million (3,413) at year-end 2020. Finance income was SEK 187 million (93). 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 | |||||
|---|---|---|---|---|---|---|
| 2019 | 2020 | 2019 | 2020 | |||
| Within one year | 1,883 | 1,898 | 1,763 | 1,841 | ||
| Between one and five years | 1,529 | 1,851 | 1,450 | 1,768 | ||
| Later than five years | 1 | 2 | 0 | 2 | ||
| Net carrying amount | 3,413 | 3,751 | 3,213 | 3,611 |
The planned residual value of the Group's rental fleet is SEK 983 million (1,071). Depreciation for the year amounted to SEK 523 million (472). Loss on disposed assets was SEK -6 million (-14). The future minimum lease payments under non-cancellable leases amount to SEK 663 million (782). Variable fees amounted to SEK 2 million (10). Future minimum lease payments under non-cancellable cancel operating lease contracts fall due as follows:
| 2019 | 2020 | |
|---|---|---|
| Within one year | 384 | 375 |
| Between one and five years | 398 | 287 |
| Later than five years | 0 | 0 |
| Net carrying amount | 782 | 663 |
In the consolidated financial statements, leases when Sandvik being a lessee are recognized as right-of-use assets and when being a lessor either as a finance lease or an operational lease.
Impairment and reversals of impairment is applicable also for right-ofuse assets. For details see section in note G13.
For all contracts an evaluation is done to identify if a lease exists by testing if Sandvik has the right to obtain substantially all of the economic benefits from use of the identified assets and has the right to direct the use of the identified asset and that the supplier has no substantial rights of substitution.
Sandvik has decided to separate non-lease components from the lease components in contracts concerning buildings. The non-lease component cost should then be recognized as an expense and not be included in the calculation of a right-of-use asset and lease liability for asset class buildings. For all other asset classes non-lease components are included in the calculation of a right-of-use asset and lease liability.
The lease contracts are assessed at the commencement date whether the lessee is reasonably certain to exercise an option to extend the lease; or to exercise an option to purchase the underlying asset; or not to exercise an option to terminate the lease. In cases of open-ended contracts local law can provide protection to the lessee from being given notice. This requires the Sandvik lessee to determine the contract period instead of considering the termination clause. The lessee then determines the length of the contract period based on factors such as the importance of building to the business, any planned or made leasehold investments and the market situation for premises.
The leasing liability and right-of-use asset is calculated by using the implicit rate in the contract. If the implicit rate cannot be identified the incremental borrowing rate is instead applied, which is the interest rate the company had been given if the investment had been financed through a loan from a financial institute. The measurement of the right-of-use asset includes amount of initial measurement of lease liability, lease payments at or before the commencement date, any initial direct cost and restoration costs. Sandvik depreciates the right-of-use asset from the commencement date to the earlier of the end of the useful life of the right-ofuse asset or the end of the lease term.
After commencement date the carrying amount of the lease liability and the right-of-use asset is remeasured to reflect any modification or reassessment of a lease contract.
Sandvik has chosen to apply the two expedients concerning leases shorter than one year and low value assets that need to be taken into consideration when a lease contract is recognized.
As a lessor, Sandvik classifies each of its leases as either an operating lease or a financial lease. The substance of the transaction rather than the form of the contract determines if it is a finance or operating lease. This also includes contracts identified under IFRS 15 Revenue from Contracts with customers containing buy-back clauses, which means under certain circumstances that control hasn't transferred to the customer and instead lease accounting under IFRS 16 Leases apply.
A finance lease is a lease that transfers substantially all the risks and rewards resulting from ownership of an underlying asset to the lessee. An operating lease is a lease that does not transfer substantially all the risks and rewards as a result from ownership of an underlying asset. A sublease should also be classified as finance or operational lease by reference to the right-of-use asset arising from the head lease, rather than by reference to the underlying asset, for example, an item of property, plant or equipment.
When the agreement is recognized as an operating lease the asset is classified as tangible assets and valued at cost less accumulated depreciation. The cost of an asset comprises the acquisition value and any initial direct costs related to the contract. The lease payments and the depreciations are included in profit or loss on a straight-line basis over the term of the lease.
Financial lease contracts are recognized as a receivable at an amount equal to the net investment in the lease and revenues are recognized in accordance with the revenue recognition principles.
Sandvik provides financing of equipment sold by the different divisions or business areas. Sandvik Financial Services mainly finances customers in the mining and construction sectors who invest in Sandvik capital equipment. To arrange financing solutions, the Sandvik customers can choose between different product offerings.
The financing offering is provided through five separate legal entities. To manage the correlating credit and financial risks, a proper credit assessment and collection procedures are implemented. Furthermore all tactical and operational decisions related to our financing exposure are following the financial framework as well as Sandvik policies and procedures.
Sandvik Financial Services is responsible for identifying and assessing its key risks related to end customer financing, as well as managing and monitoring them. Risk management is carried out in accordance with the Sandvik policies, in particular the Customer Finance procedures. All transactions are assessed based on the commercial risk of the buyer, country (political) and the product risk. All customers receive a rating using an in-house credit rating model. Different types of securities are used to support the financing, in most cases the asset is held as a security using pledges or retention of title, improving the LGD (Loss Given Default). ECA (Export Credit Agency) support is used when the risk level needs to be balanced.
| 2020 | |
|---|---|
| 100 | 292 |
| 282 | |
| 6 | |
| -1 | |
| -71 | |
| 508 | |
| 2019 190 9 -1 -5 292 |
The close of the reporting period for the associate Eimco Elecon is March 31, 2020. The dividend paid in 2020 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 with an exception for STC Rental Co. Ltd. that is recognized with a quarter in arrears.
| 2019 | Country | Revenue | Profit | Assets Liabilities | Equity Group's share. % | ||
|---|---|---|---|---|---|---|---|
| Eimco Elecon | India | 259 | 31 | 461 | 50 | 410 | 25.1 |
| Fagersta Seco AB | Sweden | – | – | 3 | 2 | 1 | 50.0 |
| Fagerstahälsan AB | Sweden | 8 | 0 | 8 | 6 | 2 | 50.0 |
| Beam IT Spa – acquired in July 2019 | Italy | 16 | 2 | 361 | 89 | 272 | 30.4 |
| STC Rental Co. Ltd. – acquired in July 2019 | Japan | 2 | 0 | 1 | 0 | 1 | 14.5 |
| 3C Metrologic | Mexico | 13 | 0 | 10 | 7 | 3 | 40.0 |
| Shanghai Innovatools Co. Ltd. | China | 5 | -1 | 11 | 2 | 8 | 40.0 |
| 2020 | Country | Revenue | Profit | Assets Liabilities | Equity Group's share. % | ||
| Eimco Elecon | India | 135 | 11 | 394 | 39 | 356 | 25.1 |
| Fagersta Seco AB | Sweden | – | – | 3 | 2 | 1 | 50.0 |
| Fagerstahälsan AB | Sweden | 8 | 0 | 8 | 6 | 2 | 50.0 |
| Beam IT Spa | Italy | 65 | 10 | 325 | 88 | 237 | 30.4 |
| STC Rental Co. Ltd. | Japan | 13 | 0 | 1 | 0 | 1 | 14.5 |
| Varel Oil and Gas Holding Inc – acquired in March 2020 | USA | 77 | -1 | 137 | 38 | 100 | 30.0 |
| 3C Metrologic | Mexico | 9 | 2 | 9 | 4 | 4 | 40.0 |
| Shanghai Innovatools Co. Ltd. | China | 4 | 0 | 10 | 3 | 8 | 40.0 |
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 percent and 50 percent 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.
| 2019 | 2020 | |
|---|---|---|
| Derivatives designated as hedging instruments | 70 | 85 |
| Funded pension plans | 417 | 312 |
| Other non-interest-bearing receivables | 401 | 345 |
| Other interest-bearing receivables | 1,503 | 1,855 |
| Total | 2,390 | 2,598 |
| 2019 | 2020 | |
|---|---|---|
| Raw materials and consumables | 5,680 | 4,573 |
| Work in progress | 4,785 | 4,302 |
| Finished goods | 13,778 | 12,598 |
| Total | 24,243 | 21,473 |
Cost of sales of the Group includes impairment of inventories of SEK 270 million (215). There were no significant reversals of impairment losses during 2020 and 2019.
Inventories are stated at the lowest end 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.
| 2019 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Current | 1–30 days past due |
31–60 days past due |
61–90 days past due |
91–180 days past due |
181–360 days past due |
More than 360 days past due |
Total | |
| Expected loss rate, % | -1.2 | 1.9 | 4.5 | 8.5 | 19.9 | 40.4 | 89.7 | 4.2 |
| Gross carrying amount – trade receivables | 11,965 | 1,586 | 511 | 284 | 346 | 210 | 632 | 15,533 |
| 11,965 | 1,586 | 511 | 284 | 346 | 210 | 632 | 15,533 | |
| Loss allowance | 143 | -31 | -23 | -24 | -69 | -85 | -567 | -655 |
| Reported value | 12,108 | 1,555 | 488 | 260 | 277 | 125 | 65 | 14,878 |
| 2020 | ||||||||
| Current | 1–30 days past due |
31–60 days past due |
61–90 days past due |
91–180 days past due |
181–360 days past due |
More than 360 days past due |
Total | |
| Expected loss rate, % | 0.7 | 2.6 | 7.5 | 10.7 | 19.6 | 47.7 | 93.5 | 5.0 |
| Gross carrying amount – trade receivables | 10,668 | 1,132 | 313 | 133 | 187 | 165 | 416 | 13,014 |
| 10,668 | 1,132 | 313 | 133 | 187 | 165 | 416 | 13,014 | |
| Loss allowance | -74 | -29 | -23 | -14 | -37 | -79 | -389 | -645 |
| Reported value | 10,595 | 1,103 | 289 | 118 | 151 | 86 | 27 | 12,369 |
2020 has been a challenging year for several of Sandvik's markets but despite increased credit risk, the negative impact has been limited. Expected credit losses remain on a low level compared to twelve months rolling revenue.
Receivables are recognized at amortized cost.
Sandvik evaluates its trade receivables, contract assets and financial leases on a collective basis for each category, respectively. Each reporting entity classifies their receivables in suitable risk categories according to Group policy.
Expected credit loss provisions are based on the full lifetime expected credit loss model with a provision matrix where fixed provision rates are applied depending on the number of days outstanding. The entities consider reasonable and supportable information about past events, current conditions and reasonable and supportable forecasts of future economic conditions when measuring the expected credit losses.
Credit risks are classified based on credit information provided by credit agencies, identified payment behavior of the customer and other relevant information available, such as lost contracts, changes in company management and other customer specific information. Additionally, a macroeconomic evaluation is conducted on the outlook of industries and countries relevant for our customers. Changes to the allowance for expected credit losses for accounts receivables are recognized in selling expenses.
Expected credit loss related to financial leases are presented in note G28, section Credit risk.
Sandvik's principles for the writing off of receivables are based on several prerequisites, such as proof of write-off, insolvency or failed legal and other collection processes. An assessment is made whether one or several of these prerequisites are fulfilled before the write-off takes place.
The Group selectively utilizes different forms of credit securities, such as letters of credit, retention of title or credit insurance.
| 2019 | 2020 | |
|---|---|---|
| Contract assets | 77 | 90 |
| Derivatives designated as hedging instruments | 339 | 332 |
| Other non-interest-bearing receivables | 2,318 | 2,065 |
| Other interest-bearing receivables | 1,801 | 1,851 |
| Advances to suppliers | 249 | 184 |
| Total | 4,785 | 4,522 |
A contract asset is recognized when the right to consideration for a performance obligation is conditional on completion of promises other than the passage of time.
| Details of reserves | 2019 | 2020 |
|---|---|---|
| Translation reserve | ||
| At the beginning of the year | 5,233 | 7,113 |
| Translation differences during the year | 1,880 | -4,757 |
| At the end of the year | 7,113 | 2,356 |
| Hedging reserve | ||
| At the beginning of the year | -123 | -103 |
| Cash-flow hedges recognized in OCI | 20 | 21 |
| At the end of the year | -103 | -82 |
| Total reserves | ||
| Reserves at the beginning of the year | 5,110 | 7,010 |
| Changes in reserves: | ||
| Translation reserve | 1,880 | -4,757 |
| Hedging reserve | 20 | 21 |
| Reserves at the end of the year | 7,010 | 2,274 |
The Board of Directors proposes an ordinary dividend of SEK 4.50 per share (0). In addition, the Board proposes an extra dividend of SEK 2.00. The total proposal corresponds to 75 percent (0) of Sandvik Group total's adjusted earnings per share. The proposed record date to receive dividends is April 29, 2021. Assuming the general meeting accepts the dividend proposal, the date to receive dividends will be May 4, 2021 and the dividend will be paid in one installment. The Annual General Meeting will be held on April 27, 2021.
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.
Equity is defined as total shareholders' equity including non-controlling interests.
Relates to payments made by owners and includes share premium reserve transferred to the statutory reserve at December 31, 2005. Any share premium as of January 1, 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.
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 SEK 0 million (20).
Dividends are recognized as a liability in the period in which they are resolved at a shareholders' meeting
Retained earnings including profit or loss for the year comprises the earned profit of the Parent Company and its subsidiaries and associated companies.
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.
Sandvik provides direct pension solutions or participates in defined benefit, defined contribution and other plans for post-employment benefits to all employees. These plans are structured in accordance with local regulations and practices. The Group's most significant defined-benefit pension plans are described below per country.
The Swedish pension plan is funded through a foundation and is based on salary at the time of retirement. It 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 total value of the assets held by the Swedish foundation was SEK 3,101 million (2,904), which was SEK 271 million (300) lower than the capital value of the corresponding pension obligations for the entire foundation.
The commitment for family pension, also a defined-benefit plan, is insured with Alecta. Sufficient information to use defined-benefit accounting for this plan is not available, and therefore recognized as a defined-contribution plan. At the end of 2020, Alecta reported a preliminary plan surplus of 148 percent (148).
The Group's share of Alecta's saving premiums is 0.1 percent, the total share of active members in Alecta is 0.7 percent. For
2021, the expected contribution to Alecta is SEK 52 million (39). The Group's mutual responsibility as a credit insured company of PRI Pensionsgaranti in Sweden is classified as a contingent liability and amounts to SEK 64 million (60). This mutual responsibility can only be imposed in the instance that PRI Pensionsgaranti has consumed all of its assets, and it amounts to a maximum of 2 percent of the Group's pension liability in Sweden.
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 to a plan to
| 2019 | 2020 | |
|---|---|---|
| Opening balance, January 1 | 27,036 | 31,845 |
| Service cost | 532 | 728 |
| Settlements | -102 | 0 |
| Interest cost | 814 | 632 |
| Contributions by plan participants | 32 | 30 |
| Benefits paid | -1,110 | -1,210 |
| Remeasurements loss/(gain) arising from: | ||
| - Financial assumptions | 3,802 | 2,495 |
| - Demographic assumptions | -117 | 206 |
| - Experience adjustments | 298 | 482 |
| Other | -205 | -2 |
| Exchange differences | 865 | -2,167 |
| Closing balance, December 31 | 31,845 | 33,038 |
| 2019 | 2020 | |
|---|---|---|
| Pension cost for defined benefit plans | -533 | -729 |
| Pension cost for defined contribution plans | -540 | -522 |
| Total amount in the income statement | -1,073 | -1,251 |
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 92 percent 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. Those eligible for the pension plan are also eligible for the medical plan at retirement. The retiree medical plan offers a dollar amount for each service year based on the age at which someone retires.
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, 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 has been closed for new participants for non-bargaining unit plans since 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 January 1, 2008 are included in a defined contribution plan.
| 2019 | 2020 | |
|---|---|---|
| Opening balance, January 1 | 21,517 | 24,757 |
| Interest income | 654 | 505 |
| Settlements | -102 | 0 |
| Contribution by the employer | 501 | 429 |
| Benefits paid directly by employer | 246 | 245 |
| Settlements paid by employer | 0 | 0 |
| Contributions by plan participants | 32 | 30 |
| Benefits paid | -1,110 | -1,210 |
| Return on plan assets, excl amount included in | ||
| interest | 2,345 | 2,036 |
| Other | -157 | -9 |
| Exchange differences | 831 | -1,982 |
| Closing balance, December 31 | 24,757 | 24,803 |
| 2019 | 2020 | |
| Actual return on plan assets | 2,999 | 2,542 |
| Consolidation ratio for funded plans % | 83 | 79 |
| Consolidation ratio for all plans including unfunded | 78 | 75 |
| Estimated contributions for the next year | 400 | 616 |
| Information by country December 31, 2019 | Sweden | UK | US | Finland | Germany | Canada | Other | Total |
|---|---|---|---|---|---|---|---|---|
| Amounts included in the balance sheet | ||||||||
| Present value of funded and unfunded obligations | 7,535 | 7,943 | 7,865 | 3,790 | 2,891 | 580 | 1,242 | 31,846 |
| - of which for actives | 3,962 | 1,744 | 3,549 | 1,193 | 1,315 | 188 | 995 | 12,946 |
| - of which for vested deferred | 2,008 | 2,380 | 919 | 858 | 289 | 90 | 45 | 6,589 |
| - of which for retirees | 1,565 | 3,819 | 3,398 | 1,738 | 1,287 | 302 | 202 | 12,311 |
| Plan assets | 2,904 | 7,634 | 7,427 | 3,856 | 1,598 | 567 | 771 | 24,757 |
| Total surplus (deficit) | -4,631 | -309 | -438 | 66 | -1,293 | -13 | -471 | -7,089 |
| Pension plans recognized according to local rules | – | – | – | – | – | – | – | -260 |
| Total net liability | – | – | – | – | – | – | – | 7,348 |
| Provision for pensions | – | – | – | – | – | – | – | 7,765 |
| Over-funded pension plans recognized as asset, | ||||||||
| non-current receivable | – | – | – | – | – | – | – | 417 |
| Funding level, % | 39 | 96 | 94 | 102 | 55 | 98 | 62 | 78 |
| Net liability for medical plans | 293 | 62 | 355 | |||||
| Average duration of the obligation, years | 25 | 18 | 14 | 18 | 12 | 12 | N/A | 15 |
| Amounts included in the income statement/other comprehensive income | ||||||||
| Current service cost | -231 | -65 | -34 | -100 | -41 | -41 | -21 | -533 |
| Net interest | -79 | -3 | -26 | 4 | -21 | 0 | -34 | -160 |
| Remeasurements | -1,240 | -254 | 51 | -45 | -128 | 15 | -37 | -1,638 |
| Total expense for defined benefits (pretax) | -1,550 | -322 | -9 | -141 | -190 | -27 | -92 | -2,331 |
| Amounts included in the cash flow statement | ||||||||
| Contributions by the employer | – | -218 | -194 | -35 | -47 | -3 | -4 | -501 |
| Benefits paid | -117 | – | -26 | – | -64 | -3 | -36 | -246 |
| Settlements paid | – | – | – | – | – | – | – | – |
| Major assumptions for the valuation of the liability | ||||||||
| Longevity, years 1) | 23 | 22 | 22 | 21 | 22 | 23 | N/A | N/A |
| Inflation, % | 1.75 | 3.05 | 2.27 | 1.3 | 2 | 2 | N/A | 2.19 |
| Discount rate, % (weighted average) | 1.75 | 2.05 | 3.19 | 1.2 | 1.3 | 3.06 | N/A | 2.1 |
| Future salary increase, % (weighted average) | 3 | 2.53 | 3 | 2.5 | 3 | 3 | N/A | 2.81 |
| Information by country December 31, 2020 | Sweden | UK | US | Finland | Germany | Canada | Other | Total |
| Amounts included in the balance sheet | ||||||||
| Present value of funded and unfunded obligations | 8,854 | 8,172 | 7,750 | 3,989 | 2,692 | 469 | 1,113 | 33,038 |
| - of which for actives | 4,715 | 1,703 | 3,256 | 1,236 | 1,115 | 183 | 869 | 13,077 |
| - of which for vested deferred | 2,492 | 2,531 | 909 | 881 | 309 | 34 | 48 | 7,203 |
| - of which for retirees | 1,647 | 3,938 | 3,585 | 1,872 | 1,268 | 252 | 191 | 12,753 |
| Plan assets | 3,101 | 7,554 | 7,540 | 3,816 | 1,596 | 464 | 732 | 24,803 |
| Total surplus (deficit) | -5,753 | -618 | -209 | -174 | -1,096 | -5 | -380 | -8,236 |
| Pension plans recognized according to local rules | – | – | – | – | – | – | – | -273 |
| Total net liability | – | – | – | – | – | – | – | 8,509 |
| Provision for pensions | – | – | – | – | – | – | – | 8,822 |
| Over funded pension plans recognized as asset, | ||||||||
| non-current receivable | – | – | – | – | – | – | – | 313 |
| Funding level, % | 35 | 92 | 97 | 96 | 59 | 99 | 66 | 75 |
| Net liability for medical plans | 268 | 59 | 327 | |||||
| Average duration of the obligation, years Amounts included in the income statement/Other |
23 | 17 | 14 | 18 | 14 | 13 | N/A | 15 |
| comprehensive income | ||||||||
| Current service cost | -333 | -62 | -146 | -118 | -42 | -8 | -21 | -729 |
| Net interest | 51 | 142 | 219 | 45 | 20 | 16 | 36 | 528 |
| Remeasurements | 829 | 423 | -143 | 163 | -96 | 4 | -34 | 1,146 |
| Total expense for defined benefits (pretax) | 547 | 502 | -69 | 90 | -117 | 12 | -20 | 946 |
| Amounts included in the cash flow statement | ||||||||
| Contributions by the employer | 0 | -146 | -177 | -36 | -50 | -0 | -19 | -429 |
| Benefits paid | -120 | 0 | -23 | 0 | -63 | -2 | -36 | -245 |
| Settlements paid | – | – | – | – | – | – | – | – |
| Major assumptions for the valuation of the liability | ||||||||
| Longevity, years 1) | 23 | 23 | 21 | 23 | 22 | 20 | N/A | N/A |
| Inflation, % | 1.75 | 2.85 | 2.25 | 1.2 | 2 | 2 | N/A | 2.11 |
| Discount rate, % (weighted average) | 1.5 | 1.45 | 2.18 | 0.8 | 1 | 2.6 | N/A | 1.58 |
1) Expressed as the expected remaining life expectancy of a 65-year-old in number of years
G22, continued
Three main categories of risks are associated with the Company's defined-benefit 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 used as the basis for determining the discount rate. Mortgage bonds are used in Sweden 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.
| SE | UK | US | FIN | DE | CA | Total | |
|---|---|---|---|---|---|---|---|
| Life expectancy, +1 | |||||||
| year | 424 | 333 | 248 | 152 | 220 | 15 | 1,393 |
| Discount rate -50 bps 1,162 | 791 | 601 | 374 | 260 | 31 | 3,218 | |
| Inflation rate + 50 bps 1,182 | 288 | -266 | 15 | 200 | -123 | 1,295 | |
| Equities -20% | 152 | 215 | 476 | 246 | 75 | 16 | 1,180 |
The fair value of plan assets on December 31, 2020 included loans of SEK 0 million (0) to Sandvik companies and the value of properties leased to Sandvik of SEK 200 million (209).
| 2019 | 2020 | |
|---|---|---|
| Interest-bearing securities | 50 | 53 |
| Shares | 27 | 26 |
| Properties | 9 | 8 |
| Other | 10 | 10 |
| Cash and cash equivalents | 4 | 3 |
| of which assets without quoted prices | 0 | 0 |
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:
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. The GPC meets twice a year.
The aims of the investment decisions made in the foundations managing plan assets are as follows:
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.
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 cases 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 to 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 used to measure pension obligations and they 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 the coming year. All other assumptions, both financial and demographic are reviewed at least annually.
The financial risk management associated with the definedbenefit plans are presented in the Directors' Report in the section Financial Risk Management.
| 2019 | 2020 | § | |
|---|---|---|---|
| Non-current liabilities | |||
| Bond issues | 15,123 | 11,344 | |
| Lease liabilities | 2,448 | 2,170 | |
| Other | 48 | 22 | |
| Total | 17,619 | 13,536 | |
| Current liabilities | |||
| Bond issues | 1,995 | 3,350 | |
| Lease liabilities | 792 | 795 | |
| Other | 239 | 206 | |
| Total | 3,026 | 4,352 |
ACCOUNTING PRINCIPLES
Financial liabilities excluding derivatives are classified and subsequently 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.
For information on contractual terms, scheduled repayments and the exposure to interest risk and foreign-currency risk, refer to the section "Financial risk management".
| Warranties Restructuring | Employee benefits |
Environmental obligations |
Legal disputes |
Other obligations |
Total | ||
|---|---|---|---|---|---|---|---|
| Balance at January 1, 2019 | 458 | 1,188 | 571 | 359 | 295 | 404 | 3,275 |
| Provisions made during the year | 85 | 1,681 | 355 | 100 | -40 | 574 | 2,756 |
| Provisions used during the year | -116 | -945 | -318 | -59 | -27 | -195 | -1,659 |
| Unutilized provisions reversed during the year | -59 | -177 | -17 | -5 | -29 | -136 | -422 |
| Reclassifications | – | 0 | 0 | – | – | 1 | 1 |
| Business combinations | 46 | -156 | 55 | -2 | 3 | -4 | -58 |
| Translation differences | 30 | 3 | -23 | 5 | 6 | -27 | -7 |
| Balance at December 31, 2019 | 445 | 1,595 | 622 | 398 | 208 | 618 | 3,885 |
| of which current | 374 | 1,442 | 221 | 60 | 171 | 425 | 2,693 |
| of which non-current | 71 | 154 | 401 | 338 | 37 | 192 | 1,193 |
| Balance at January 1, 2020 | 445 | 1,595 | 622 | 398 | 208 | 618 | 3,885 |
| Provisions made during the year | 225 | 2,088 | 285 | 67 | 62 | 367 | 3,094 |
| Provisions used during the year | -157 | -846 | -296 | -11 | -32 | -204 | -1,545 |
| Unutilized provisions reversed during the year | -70 | -232 | -54 | -2 | -16 | -73 | -447 |
| Reclassifications | 2 | 15 | -16 | 1 | 7 | -16 | -7 |
| Business combinations | 1 | 0 | 4 | 0 | 0 | 4 | 9 |
| Translation differences | -23 | -44 | -17 | -23 | -32 | -61 | -200 |
| Balance at December 31, 2020 | 423 | 2,576 | 529 | 431 | 196 | 635 | 4,790 |
| of which current | 313 | 2,188 | 182 | 61 | 162 | 474 | 3,381 |
| of which non-current | 110 | 388 | 346 | 369 | 34 | 161 | 1,409 |
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.
An environmental provision is recognized when there is a legal obligation for a clean up.
Provision for costs for restoring contaminated land is made in accordance with the Group's published environmental principles when there is a legal requirement or other binding commitment to restore established contaminated land and when the cost can be measured with reasonable precision. Site restoration is included in environmental obligations.
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.
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, and customer and supplier claims relating to ongoing or finished projects.
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.
Sandvik is 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 Enterprise Risk Management section.
| Other non-current liabilities | 2019 | 2020 |
|---|---|---|
| Derivatives designated as hedging instruments | 263 | 239 |
| Other | 36 | 35 |
| Total | 298 | 274 |
| Other current liabilities | ||
| Derivatives designated as hedging instruments | 270 | 233 |
| Bills payable | 88 | 50 |
| Contract liabilities | 2,149 | 2,145 |
| Other | 2,000 | 1,649 |
| Total | 4,507 | 4,077 |
Other liabilities excluding derivatives are classified and subsequently measured at amortized cost.
Derivatives are classified at fair value through profit and loss, with the exception, of those that are designated as hedging instruments in a cash flow hedge.
A contract liability is recognized when a payment is received before the performance obligation has been satisfied.
| Accrued expenses and deferred income | 2019 | 2020 |
|---|---|---|
| Personnel related | 4,592 | 3,742 |
| Other accrued expenses | 2,352 | 2,556 |
| Total | 6,944 | 6,297 |
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 Group.
| Contingent liabilities | 2019 | 2020 |
|---|---|---|
| Bills discounted | 5 | 4 |
| Other surety undertakings and contingent liabilities | 1,826 | 2,297 |
| Total | 1,831 | 2,301 |
The Group's surety undertakings and contingent liabilities amounted to SEK 2,301 million (1,831) and mainly comprised of bank guarantees and ongoing proceedings.
Pledged assets for own liabilities and provisions.
| Pledged assets | 2019 | 2020 |
|---|---|---|
| Property mortgages | 234 | 225 |
| Total | 234 | 225 |
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 non-occurrence of one or more uncertain future events.
A contingent liability is also recognized 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.
Through its comprehensive international operations, Sandvik is exposed to financial risks.
Group Treasury is the function responsible for managing most of the Group's financial risks. The primary objectives of the function are 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.
The Board of Directors is responsible for establishing the Group's finance policy, which comprises guidelines, objectives, and limits for financial management within Group Treasury as well as the management of financial risks within the Group.
Group Treasury supports Group companies and its tasks are to support subsidiaries with loans, deposits, foreign exchange deals, and banking solutions, as well as to act as an advisor in financial matters. The function conducts internal banking operations and is based at the head office in Stockholm. It is also responsible for the Group's bank account set-up.
In addition, Group Treasury conducts operations for payment advisory and trade finance, and is responsible for the Group's global policy for granting credit to customers in conjunction with sales. The customer finance activity is carried out through the business area Sandvik Mining and Rock Technology through selected locations worldwide.
Finally, Group Treasury also manages the financial risks associated with the Group's defined-benefit pension plans.
Only institutions with a solid financial position and solid credit ratings are accepted as Sandvik's counterparties in financial transactions.
Transaction exposure occurs when sales and purchases are made in two different currencies which affect profit for the year.
Sandvik's annual transaction exposure, meaning the Group's net flow of currencies, after full offsetting of the counter-value in the exporting companies' local currencies, and measured at the average exchange rate, amounted to SEK 16,189 million (20,266) in 2020. The most important currencies for one year of exposure are shown in the following diagram.
Net flow in foreign currencies
Sandvik generally offers customers the possibility to pay in their own currencies through the global sales organization. As a result, the Group is continuously exposed to currency risks associated with account receivables denominated in foreign currency and with future sales to foreign customers. Since a large percentage of production is concentrated to a few countries, while sales occur in many countries, Sandvik is exposed to a large net inflow of foreign currencies.
In order to mitigate the currency risk, pricing is adjusted against both customers and suppliers in circumstances where Sandvik is affected negatively by currency movements. To further reduce exposure to foreign currencies, currencies received are used to pay for purchases in the same currency via a netting structure.
A certain portion of the anticipated net flow of sales and purchases is hedged through financial instruments and bank account balances in accordance with guidelines set in the Group's finance policy. In addition, major project orders are currency hedged to protect the gross margin. Under the finance policy, the CFO has a mandate to hedge the annual transaction exposure. At yearend, the total hedged amount was SEK 1,754 million (2,136). The average duration for the hedged volume of foreign currency was 3 months (3). Unrealized gains from outstanding currency contracts for hedging of future net flows amounted to SEK 184 million (18) at year-end. This amount consists of SEK 135 million in gains related to contracts maturing in 2021 and SEK 49 million in gains related to contracts maturing in 2022 or later.
If all exchange rates for the exposure currencies were to change by 5 percent in an unfavourable direction, total operating profit over a 12-month period would change by approximately SEK -1,239 million (-1,360 ), assuming that the composition is the same as it was at year-end.
| AUD | CAD | CHF | CNY | EUR | USD | ZAR | Other | Total |
|---|---|---|---|---|---|---|---|---|
| -164 | -64 | -36 | -129 | -123 | -433 | -53 | -237 | -1,239 |
G28, continued
Translation exposure occurs when assets and liabilities are denominated in different currencies.
Since the Swedish krona (SEK) is Sandvik's base currency, a translation risk related to the valuation of the net assets in foreign subsidiaries and the profit/loss in foreign currency achieved during the period occurs. The net assets, which usually consist of the foreign subsidiaries' shareholders equity, are translated to SEK at the rates applied at the balance sheet date. At December 31, the Group's net assets in subsidiaries in local currencies amounted to SEK 54,187 million (58,021).
2019 2020
To avoid translation risk in the balance sheets of subsidiaries, they are financed in their functional currency through the internal bank. External borrowing often takes place in a specific currency, as shown in the first diagram. The currency risk that arises in the internal bank as a result of this is managed using various derivatives to minimize the translation risk.
Sandvik has chosen not to hedge future profits in foreign subsidiaries. Net assets are also not hedged, but the differences that arise due to changes in exchange rates since the preceding quarter are recognized directly in other comprehensive income. The second diagram shows the distribution of net assets among various currencies.
If exchange rates were to change by 5 percent in an unfavorable direction the net effect on other comprehensive income would be approximately SEK -2,712 million (-2,904). This net effect primarily comprises translation exposure in equity.
| AUD | CHF | CNY | EUR | GBP | INR | USD | Other | Total |
|---|---|---|---|---|---|---|---|---|
| -131 | -143 | -151 | -890 | -164 | -157 | -552 | -524 | -2,712 |
Risk Interest-rate risk is defined as the risk that changes in market interest rates will have 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 and liabilities. Sandvik measures interest-rate risk as the change over the forthcoming 12 months given a 1 percentage point change in interest rates.
If market rates were to rise by 1 percentage point across all terms, in relation to loans for which the interest rate will be reset during the coming year, interest costs would be impacted by SEK -29 million (-36).
An interest-rate sensitivity analysis of interest-rate swap agreements valid at year-end, and to which hedge accounting was applied, shows that other comprehensive income would change by SEK 34 million (50) as a result of a 1 percentage point shift in the interest-rate curve.
| Including effect of inter est-rate derivatives |
Effective rate of interest, % |
Fixed-inter est term, months |
Recognized liability, MSEK |
|---|---|---|---|
| Bond loans, Swedish MTN | 3.3 | 11 | 3,650 |
| Bond loans, European MTN | 3.6 | 58 | 11,044 |
| Commercial papers | – | – | – |
| Other loans from banks | 5.4 | 4 | 228 |
| Total loans | 3.6 | 46 | 14,923 |
| Interest effect of currency derivatives |
1.1 | ||
| Total incl. currency derivatives | 4.7 |
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 46 months (49) 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 with currency derivatives. Consequently, there is an interest-rate effect in currency derivatives of 1.1 percent between the currencies the Group borrows and the currencies the Group lends. The Group's average interest expense, including other loans and effects of various derivatives, was 4.7 percent (4.4).
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 that are 100 percent effective and with a notional amount of SEK 1,500 million, 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 presentation of all interest-rate swap agreements entered into, and information regarding their duration, can be found at the end of this note.
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 is disclosed in note G27.
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.
Liquidity and refinancing risk is defined as the risk that financing possibilities will be limited when loans are to be refinanced, and that payment commitments cannot be met as a result of insufficient liquidity.
Nominal amount
| Average | |||
|---|---|---|---|
| remaining | |||
| Recognized | credit | ||
| Currency | liability, MSEK | periods, years | |
| Bond loans, Swedish MTN | SEK | 3,650 | 1.0 |
| Bond loans, European MTN | EUR | 11,044 | 5.5 |
| Commercial papers | EUR, SEK | – | – |
| Other loans from banks | EUR, SEK | 228 | 0.4 |
| Total borrowings | 14,923 | 4.3 |
According to the finance policy, the Group's capital employed excluding cash and cash equivalents should be financed on a longterm basis. At year-end, the Group's capital employed, excluding cash and cash equivalents, was SEK 68,040 million and long-term financing, including share capital, pension liabilities, long-term tax liabilities, long-term provisions and the guaranteed longterm credit facility, amounted to SEK 96,540 million. The shortterm liquidity reserve, comprising committed credit facilities and accessible cash and cash equivalents was SEK 28,667 million. This reserve should at a minimum correspond to loans that mature for payment over the next six months and two weeks operating expenses, calculated to SEK 5,518 million.
Sandvik has a revolving credit facility totaling SEK 9,000 million maturing in 2023. The facility was 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 76 percent at year-end 2020 compared with 87 percent one year earlier. The maturity structure for the Group's financial liabilities and derivatives is presented further down in this note.
At year-end, Standard & Poor's, the international credit rating agency, had assigned an A- 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, please visit home.sandvik.
The Group's commercial and financial transactions give rise to credit risk in relation to Sandvik's counterparties. Credit risk or counterparty risk is defined as the risk for losses if the counterparty does not fulfill its commitments.
The credit risk to which Sandvik is exposed to can be divided into three categories:
– Financial credit risk
| Total credit risk | 2019 | 2020 |
|---|---|---|
| Trade receivables 1) | 14,878 | 12,369 |
| Cash and cash equivalents | 16,987 | 23,752 |
| Unrealized net gains on derivatives | 409 | 417 |
| Other receivables | 433 | 622 |
| Outstanding credits | 3,527 | 3,611 |
| Total | 36,235 | 40,771 |
1) Excludes assets held for sales.
Sandvik has entered into agreements with the banks that are most important to the Company, covering such matters as the right to offset assets and liabilities that arise from financial derivative transactions, so-called ISDA agreements. This means that the Company's counterparty exposure to the financial sector is limited to the unrealized net gains that arise in derivative agreements, and investments and bank balances. At December 31, the value of these amounted to SEK 24,169 million (17,396).
Sandvik companies are generally exposed to credit risk associated with outstanding trade receivables from ongoing sales. The credit risk is spread over a large number of customers in the business areas, and the 2020 consolidated credit losses were limited despite challenging circumstances on several of Sandvik's market segments. To mitigate increasing credit risk, focus on the area sharpened and additional credit control tools were introduced. Sandvik's credit losses, defined as the total of receivables written off and change in bad debt reserve, amounted to SEK -150 million (-24), equivalent to 0.2 percent of sales. The gross value of trade receivables was SEK 13,016 million (15,535) at December 31. Total impairment of these was SEK -647 million (-657). An age analysis of trade receivables at December 31, is presented in note G19.
Sandvik offers short- and long-term customer financing through its own Financial Services companies and in partnership with financial institutions and banks. At year-end, the value of outstanding credits referring to finance leases amounts to SEK 3,725 million (3,615), of which SEK -114 million (-88) was reserved for doubtful receivables.
In addition to the traditional financing of equipment, Sandvik also offers short-lease machinery. At year-end, the net carrying amount of this short-lease machinery was SEK 202 million (447).
Sandvik's financial risks related to raw materials are primarily concentrated to nickel and electricity. The price risks associated with these are partially hedged through the signing of financial contracts. A change in the electricity price of SEK 0.1 per kWh is estimated to affect Sandvik's operating profit by plus or minus SEK 80 million (85) on an annual basis, based on the prevailing conditions at year-end 2020.
When Sandvik Materials Technology obtains a customer order containing a fixed price for nickel, molybdenum or copper, the prices of these materials are hedged by signing financial contracts. This means that Sandvik'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 applies a hedging strategy in order to minimize the metal price risk in connection with transactions conducted at a variable metal price. The measurement of inventory is not affected by hedging.
Changes in metal prices affect the profit and loss statement as a consequence of the lead time between the purchase of raw material and delivery of the finished product. The effect can be estimated through the rules regarding valuation of inventory. The net effect is presented in the "Development in business areas" section.
For Sandvik's large production units in Sweden and Finland, the electricity price is continuously hedged through derivatives. Electricity consumption at these units normally totals around 800 GWh. The hedging horizon at year-end was about 22 months' (18) expected consumption.
Net total consumption of nickel amounted to about 14,300 metric tons during the year.
At year-end, the volume of hedged nickel inventory was 643 metric tons (2,184). The market value of commodity derivatives entered into was SEK 10 million (-33).
The volume of electricity hedged with derivatives was 1,405 GWh (1,239) at year-end. The market value of these derivative contracts amounted to SEK -11 million (14).
For a more detailed breakdown of the quarterly effects on cash flow of the transactions that have been recognized in the hedge reserve, see the table at the end of this note.
Sandvik has comprehensive pension obligations in the countries in which it operates. The pension solutions and funding requirements vary depending on legislation and local agreements. The largest funded pension plans are found in the US, UK, Finland, Sweden, Germany, and Canada. Three main risks are associated with Sandvik's pension obligations; interest rate fluctuations, capital market volatility, and changes in life expectancy.
The Group-funded pension liability has an average duration of 18.4 years. The average duration of the Group's interest-bearing assets in the pension portfolio is 16.7 years. The allocation to interest-bearing assets is 51 percent of the pension portfolio. Due to the asset allocation and differences in duration between the interest-bearing assets and the liability, Sandvik is exposed to interest rate fluctuations, both when discounting the liability but also as market values change in the bond portfolio. If the average discount rate falls by -50 basis points the pension liability would increase by SEK 3,218 million.
25 percent of the pension portfolio is invested in equities. A 20 percent movement in the equity portfolio would result in a change in market value of SEK 1,180 million. If the life expectancy assumptions increase by one year, the pension liability would rise by 3.3 percent which corresponds to SEK 1,393 million. The calculated total loss potential for one year (pension risk), based on stress tests, is on aggregate SEK 4,325 million.
In 2020, the pension assets totalled SEK 24,827 million (24,788) and the corresponding pension liability amounted to SEK 31,320 million (29,899), which is equal to a funding level of 79 percent (83). The return on Sandvik's pension assets was 10.8 percent during the year (14.0). In addition, Sandvik has unfunded pension commitments of SEK 1,733 million (1,946).
The pension plans are governed through Sandvik's Pension Supervisory Board (PSB). PSB is responsible for implementing policies and directives, approving new plans or material changes and closure of existing plans. The pension plans and governance are further described in note G22.
| 2019 | 2020 | |
|---|---|---|
| Financial assets | ||
| Derivatives | ||
| Foreign exchange contracts | 365 | 380 |
| Commodity and electricity derivatives | 44 | 38 |
| Total 1) | 409 | 418 |
| Financial liabilities | ||
| Derivatives | ||
| Foreign exchange contracts | 288 | 279 |
| Interest-rate swaps | 181 | 153 |
| Commodity and electricity derivatives | 63 | 40 |
| Total 2) | 532 | 472 |
1) Included in other receivables.
2) Included in other liabilities.
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 SEK 417 million. The carrying amount of corresponding liabilities was SEK -472 million. 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 SEK 177 million would be offset in accordance with the framework agreement governing offsetting.
Calculation at fair value of the Group's non-current borrowings would increase the total carrying amount by SEK 2,075 million (2,276). When measuring interest-bearing liabilities, the company's Swedish and European bond loans have 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 below. 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.
| Total carrying amount | |||||||
|---|---|---|---|---|---|---|---|
| 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 |
| 81 | |||||||
| 12,369 | |||||||
| 3,802 | |||||||
| 418 | |||||||
| 23,752 | |||||||
| 491 | 498 | 35,279 | 39,923 | 0 | 0 | 35,770 | 40,421 |
| 14,923 | |||||||
| 472 | |||||||
| 6,974 | |||||||
| 1 | |||||||
| 3,308 | |||||||
| 401 | 369 | 28,784 | 25,205 | 131 | 103 | 29,316 | 25,677 |
| 82 – – 409 – – 401 – – – |
Fair value through profit (loss) 81 – – 417 – – 369 – – – |
– 14,878 3,413 – 16,987 17,453 – 7,598 1 3,732 |
Amortized costs – 12,369 3,802 – 23,752 14,923 – 6,974 1 3,308 |
– – – 0 – – 131 – – – |
Hedge Accounting – – – 0 – – 103 – – – |
82 14,878 3,413 409 16,987 17,453 532 7,598 1 3,732 |
1) Excludes assets held for sales.
2) Comprises parts of the Group's other receivables and accrued income from contract assets, financial leasing, and customer financing recognized in the balance sheet.
3) Derivatives form part of the other receivables recognized in the balance sheet.
4) Recognized in the balance sheet as non-current and current liabilities to financial institutions and other liabilities. 5) Derivatives form part of the other liabilities recognized in the balance sheet.
6) Form part of the Group's other liabilities and accrued expenses from leasing recognized in the balance sheet.
The Company's financial liabilities amounted to SEK 25,677 million
(29,316) at year-end.
| 2019 | 2020 | |
|---|---|---|
| Fair value through profit or loss | -608 | 432 |
| Amortized costs | -585 | -1 321 |
| Hedge accounting | 20 | 21 |
| 2019 2020 |
|||||||||
|---|---|---|---|---|---|---|---|---|---|
| <6 | 6-12 | <6 | 6-12 | ||||||
| months | months 1-5 years | >5 years | months | months 1-5 years | >5 years | ||||
| Bank loans | EUR, Other | -156 | -99 | -89 | – | -109 | -100 | -22 | – |
| Commercial papers | SEK | – | – | – | – | – | – | – | – |
| Medium Term Notes | SEK | -2,071 | -37 | -3,784 | – | -2,038 | -675 | -1,065 | – |
| European Medium Term Notes | EUR | -279 | -135 | -4,756 | -9,282 | -971 | -130 | -5,247 | -7,164 |
| Private Placements | USD | – | – | – | – | – | – | – | – |
| Derivatives | |||||||||
| - Currency derivatives | 90 | -2 | -15 | -21 | 116 | 6 | 8 | -8 | |
| whereof outflow | -204 | -11 | -24 | -21 | -157 | -27 | -18 | -8 | |
| whereof inflow | 294 | 9 | 9 | – | 273 | 33 | 26 | – | |
| - Interest rate derivatives | -41 | -2 | -154 | – | -42 | -20 | -95 | – | |
| - Commodity and electricity derivatives | -17 | 5 | -8 | – | 13 | -2 | -12 | – | |
| Leases 1) | -374 | -418 | -1,873 | -575 | -373 | -423 | -1,473 | -696 | |
| Accounts payable 2) | -7,598 | – | – | – | -6,974 | – | – | – | |
| Total | -10,446 | -688 | -10,679 | -9,878 | -10,378 | -1,344 | -7,906 | -7,868 |
1) Discounted values based on IFRS 16.
2) Excludes assets held for sales.
| Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | Q1 2022 | Q2 2022 | Q3 2022 | Q4 2022 | 2023 and later | |
|---|---|---|---|---|---|---|---|---|---|
| Interest rate derivatives | – | – | – | -8 | – | – | – | – | -61 |
| Total | – | – | – | -8 | – | – | – | – | -61 |
G28, continued
| 2019 | 2020 | |
|---|---|---|
| Carrying amount (included in other liabilities) | -131 | -103 |
| Notional amount | 1,500 | 1,500 |
| Change in fair value of outstanding hedging instruments since January 1 |
31 | 28 |
Financial instruments recognized in the balance sheet include assets, such as account receivables, financial investments and derivatives, and liabilities such as loan liabilities, account payables, 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. Account receivables are recognized upon issuance of the invoice. A liability is recognized when the counter-party has performed under the agreement and the company is contractually obliged to settle the obligation, even if no invoice has been received.
At initial recognition, the Group measures financial assets and liabilities at its fair value plus or minus, in the case of a financial asset or liability not at fair value through profit or loss (FVPL), transaction costs including all fees, premiums and discounts that are directly attributable to the acquisition or issue of the financial asset and liability. Transaction costs of financial assets and liabilities carried at FVPL are expensed in the income statement.
A financial asset is derecognized when the rights to receive cash flows under the agreement have expired, or have been transferred and the group has substantially transferred all of the risks and rewards. 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 offset 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.
Financial assets excluding derivatives Financial assets excluding derivatives, include equity and debt instruments. The Group classifies its financial assets as those to be measured at fair value, and those to be measured at amortized
cost. Equity instruments are measured at fair value, and gains and losses are recorded in the income statement. For those that are not held for trading, this will depend on whether the Group has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income.
For debt instruments, which includes accounts receivables, the classification depends on the Group's business model for managing the financial assets and the contractual terms of the cash flows: Amortized Cost: Assets that are held for collection of contractual cash flows, where those cash flows represent solely payments of principal and interest, are measured at amortized cost. Interest income from these financial assets is included in financial income using the effective interest rate method. Any gain or loss arising on derecognition is recognized directly in the income statement. Fair Value through profit and loss: Assets that do not meet the criteria for amortized cost are measured as fair value through profit and loss.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. 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:
Level 1: Fair value is determined according to prices listed on an active market for the same instrument.
Level 2: Fair value is determined based on either directly (as a price) or indirectly (derived from prices) observable market data that is not included in level 1.
Level 3: Fair value is determined based on input data that is not observable in the market.
All of Sandvik's financial instruments measured at fair value are measured according to Level 2.
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 at 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 payables with variable interest and current receivables and payables (for example, trade receivables and accounts payable), the fair value has been considered to correspond to the carrying amount.
Hedge accounting is applied in accordance with IAS 39 and to meet the criteria there must be a clear relationship between the hedging instrument and the hedged item. The relationship is expected to be highly effective and it must be possible to reliably measure such effectiveness. Moreover, the hedge must be formally designated and documented. Gains and losses on remeasurement of derivatives used for hedging purposes are recognized as described below under cash flow 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 the income statement. When the hedged item impacts income statement, the accumulated changes in value of the hedging instrument are reclassified to the income statement. The gain or loss relating to the effective portion of hedging instruments is recognized in the income statement within the same line as the hedged item.
The Group's sales to associated companies amounted to SEK 18 million (5). The Group's purchases from associated companies amounted to SEK 4 million (5). All transactions are carried out on market terms.
Except as indicated in note G4, 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 | 2019 | 2020 |
|---|---|---|
| Cash and cash equivalents comprise: | ||
| Cash and bank | 4,936 | 20,735 |
| Short-term investments comparable to cash and | ||
| cash equivalents | 12,017 | 3,017 |
| Total in the balance sheet | 16,953 | 23,752 |
| Total in the cash flow statement | 16,987 | 23,752 |
| Interest and dividend paid and received | 2019 | 2020 |
| Dividend received | 20 | 5 |
| Interest received | 346 | 356 |
| Interest paid | -1,425 | -1,035 |
| Total | -1,059 | -674 |
| Other adjustments for non-cash items, etc 2019 |
|||||||
|---|---|---|---|---|---|---|---|
| Changes in value of financial instruments | 90 | 2020 -1,011 |
|||||
| Unappropriated results of associated companies |
-8 | -6 | |||||
| Gains and losses on disposal of non-current assets |
-69 | 146 | |||||
| Gains and losses on disposal of companies and shares |
– | 1 | |||||
| Provisions for pensions | 533 | 882 | |||||
| Other provisions | 128 | 942 | |||||
| Other | -66 | -28 | |||||
| Total | 428 | 926 |
| Cash Flow Non-cash flow changes |
|||||||||
|---|---|---|---|---|---|---|---|---|---|
| January 1, 2019 |
New loans Amortization | Reclassification | New leases Currency/FX | Other | December 31, 2019 |
||||
| Interest-bearing liabilities | 21,554 | 22 | -4,438 | -2,109 | – | 159 | -17 | 15,170 | |
| Current interest-bearing liabilities | 2,375 | 38 | -2,227 | 1,885 | – | 11 | 152 | 2,234 | |
| Lease liabilities | 3,325 | – | -945 | 0 | 770 | 81 | 9 | 3,240 | |
| Dividends paid | – | – | -5,340 | – | – | – | – | – | |
| Total | 27,254 | 60 | -12,950 | -224 | 770 | 251 | 144 | 20,645 | |
| Cash Flow | Non-cash flow changes | ||||||||
| January 1, 2020 |
New loans Amortization | Reclassification | New leases Currency/FX | Other | December 31, 2020 |
||||
| Interest-bearing liabilities | 15,170 | 14 | -74 | -3,536 | – | -245 | 37 | 11,366 | |
| Current interest-bearing liabilities | 2,234 | 43 | -2,280 | 3,536 | – | 21 | 2 | 3,556 | |
| Lease liabilities | 3,240 | – | -1,012 | 0 | 907 | -173 | 3 | 2,965 |
Total 20,645 56 -3,366 0 907 -397 43 17,888
The consolidated cash flow statement is prepared in accordance with the indirect method. 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.
The acquisitions of business combinations executed in 2019 and 2020 are set out below. Annual revenue and number of employees reflect the latest known information at the date of the respective transaction.
| Business area | Cash Generating Unit | Company/Unit | Country | Acquisition date | Annual revenue No. of employees | |
|---|---|---|---|---|---|---|
| Sandvik Manufacturing and Machining Solutions |
Business area level SMM |
Wetmore Tool & Engineering |
USA | January 9, 2019 160 MSEK in 2017 | 170 | |
| Sandvik Mining and Rock Technology |
Sandvik Mining and Rock Technology |
Artisan | USA | February 11, 2019 | 12 MUSD in 2017 | 60 |
| Sandvik Manufacturing and Machining Solutions |
Seco Tools | OSK | Japan | April 10, 2019 120 MSEK in 2017 | 90 | |
| Sandvik Mining and Rock Technology |
Sandvik Mining and Rock Technology |
Newtrax | USA | June 17, 2019 | 26 MCAD in 2018 | 120 |
| Sandvik Materials Technology | Sandvik Materials Technology |
Thermaltek | USA | December 31, 2019 | 13 MUSD in 2018 | 30 |
| Sandvik Manufacturing and Machining Solutions |
Walter | Melin Tool Company |
USA | December 31, 2019 | 22 MUSD in 2018 | 100 |
| Sandvik Materials Technology | Sandvik Materials Technology |
Summerill Tube Corporation |
USA | January 14, 2020 100 MSEK in 2018 | 45 | |
| Sandvik Manufacturing and Machining Solutions |
Seco Tools | Quimmico Cen tro Technológico (QCT) |
Mexico | June 1, 2020 | 90 MSEK in 2019 | 130 |
| Sandvik Mining and Rock Technology |
Sandvik Mining and Rock Technology |
Allied Construction Partners LLC |
USA | October 2, 2020 | 29 MUSD in 2019 | 38 |
| Sandvik Manufacturing and Machining Solutions |
Dormer Pramet | Miranda Tools | India | December 23, 2020 | 200 MSEK 2019 | 580 |
| Sandvik Manufacturing and Machining Solutions |
Sandvik Coromant | CGTech | USA etc. December 31, 2020 470 MSEK in 2019 | 180 |
The fair value of acquired assets and assessed liabilities has been preliminarily established for the acquisitions of Miranda Tools and CGTech. The final fair value of acquired assets and assessed liabilities for Summerill Tube Corporation, Quimmico Centro Technológico (QCT) and Allied Construction Partners LLC has been established during 2020. Only minor IFRS adjustments were made to the acquisition values.
All acquisitions above were made through the purchase of 100 percent of shares and voting rights or through the purchase of the net assets of the acquired operations, except for the acquisition of Allied Construction that was made through the purchase of 79 percent of shares and voting rights. Sandvik received control over
the operations upon the date of closing the acquisition. No equity instruments have been issued in connection with the acquisitions. All acquisitions have been accounted for using the acquisition method.
The amounts presented in the following tables detail the recognized amounts aggregated by business area, as the relative amounts of the individual acquisitions are not considered significant, except for CGTech and Miranda Tools businesses which are disclosed separately. Sandvik is in the process of reviewing the final values for CGTech and Miranda Tools. No adjustments are expected to be material.
| Fair value recognized in 2020 | SMRT | SMM | SMT | Total | ||
|---|---|---|---|---|---|---|
| Whereof | Whereof | |||||
| Total | CGTech | Miranda Tools | ||||
| Intangible assets | – | 390 | – | 347 | 36 | 426 |
| Property, plant and equipment | 9 | 96 | 8 | 35 | 24 | 129 |
| Other non-current assets | 2 | 25 | 18 | 7 | – | 27 |
| Inventories | 52 | 39 | – | 35 | 39 | 130 |
| Receivables | 26 | 146 | 118 | 28 | 17 | 189 |
| Other current assets | 1 | 22 | 22 | 1 | – | 23 |
| Cash and cash equivalents | 5 | 70 | 70 | – | – | 75 |
| Interest-bearing loans and borrowings | -2 | -16 | -16 | – | – | - 18 |
| Other liabilities and provisions | -11 | -150 | -135 | -15 | -26 | - 187 |
| Deferred tax assets/liabilities, net | 2 | -192 | -192 | – | – | - 190 |
| Net identifiable assets and liabilities | 84 | 430 | - 107 | 438 | 90 | 604 |
| Goodwill and surplus values, net | 20 | 2,793 | 2,793 | – | – | 2,813 |
| Purchase consideration | -104 | -3,223 | -2,686 | -438 | -90 | -3,417 |
| Cash and cash equivalents in the acquired business | 5 | 70 | 70 | – | – | 75 |
| Transaction expenses | 0 | -45 | -29 | -13 | 0 | -46 |
| Net cash outflow | -99 | -3,198 | -2,645 | -451 | -90 | -3,388 |
In January, Sandvik Materials Technology acquired Summerill Tube Corporation, a manufacturer of high precision tubes. Since 1892 it has delivered seamless and welded tubing in stainless steels and nickel alloys to various high demanding industries including aerospace, transportation and petrochemical. Intangible assets of SEK 27 million and goodwill of SEK 9 million was recorded on the purchase. The deal has a limited impact on earnings per share from the start. The goodwill is deductible for tax purposes.
In June, Seco Tools a division within Sandvik Manufacturing and Machining Solutions acquired the cutting tools division of Quimmco centro tecnológico (QCT), a privately owned Mexican company offering integral machining solutions. The acquisition of QCT's cutting tools division expands Seco Tools' capabilities in custom-made tools, meaning further long-term support in our productivity offering to customers. The deal has a limited impact to earnings per share from the start. Goodwill of SEK 44 million was recorded on the purchase. The goodwill is not deductible for tax purposes.
In October, Sandvik Mining and Rock Technology acquired 79 percent of Allied Construction Products LLC (Allied), a US distributor of hydraulic hammers to the construction and mining industries and manufacturer of compactor plates and mounting brackets. Sandvik was already a 21 percent minority shareholder of the company and Sandvik's products generated about 80 percent of Allied's revenues. The deal is neutral to Sandvik's earnings per share from the start. Goodwill of SEK 20 million was recorded on the purchase. The goodwill is deductible for tax purposes.
In December, the Sandvik Coromant division within business area Sandvik Manufacturing and Machining Solutions completed the acquisition of US-based CGTech, a global market leader in software for numerical control (NC/CNC) simulation, verification and optimization. The product offering includes Vericut®, a machining simulation and optimization software which is CAM, machine tool manufacturer and cutting tool neutral and works stand alone or in conjunction with all major CAM suppliers. The combined machining expertise of Sandvik Coromant and CGTech will enhance the Group´s capabilities in machining intelligence, strengthen the software offering and facilitate an improved presence in key areas of the customer value chain. Intangible assets of SEK 1,079 million and goodwill of SEK 1,714 million were recorded on the purchase. The goodwill is deductible for tax purposes.
In December, Sandvik's division Dormer Pramet within business area Sandvik Manufacturing and Machining Solutions completed the acquisition of the entire business of the Indian company Miranda Tools, comprising the manufacture of High Speed Steel and solid carbide round tools. The acquisition enhances Dormer Pramet's product offering and facilitates an improved presence in key markets such as India, China and Southeast Asia.
The deal has a limited impact on Sandvik's earnings per share. Intangible assets of SEK 143 million and goodwill of SEK 204 million were recorded on the purchase. The goodwill is not deductible for tax purposes.
| SMRT | SMM | SMT | Total | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2020 Change | 2019 | 2020 Change | 2019 | 2020 Change | 2019 | 2020 Change | |||||
| Intangible assets | 23 | 23 | – | – | – | – | – | 139 | 139 | 23 | 162 | 139 |
| Property, plant and equipment | 4 | 4 | – | 45 | 113 | 68 | – | 3 | 3 | 49 | 120 | 71 |
| Other non-current assets | 21 | 21 | – | – | – | – | – | – | – | 21 | 21 | – |
| Inventories | 61 | 61 | – | 52 | 120 | 68 | – | 10 | 10 | 113 | 191 | 78 |
| Receivables | 175 | 175 | – | 86 | 97 | 11 | – | 8 | 8 | 261 | 280 | 19 |
| Other current assets | 29 | 29 | – | 3 | 5 | 2 | – | – | – | 32 | 34 | 2 |
| Cash and cash equivalents | 38 | 38 | – | 3 | 10 | 7 | – | – | – | 41 | 48 | 7 |
| Interest-bearing loans and borrowings | -245 | -245 | – | -28 | -28 | – | – | – | – | -273 | - 273 | – |
| Other liabilities and provisions | -200 | -200 | – | -94 | -184 | -90 | – | -4 | -4 | -294 | - 388 | - 94 |
| Deferred tax assets/liabilities, net | 4 | 4 | – | 2 | 1 | -1 | – | – | – | 6 | 5 | - 1 |
| Net identifiable assets and liabilities | - 90 | -90 | – | 69 | 134 | 65 | – | 156 | 156 | -21 | 200 | 221 |
| Goodwill and surplus values | 930 | 930 | – | 730 | 606 | -124 | 154 | -154 | 1,814 | 1,536 | -278 | |
| Purchase consideration | -840 | -840 | – | -799 | -740 | 59 | -154 | -156 | -2 | -1,793 | -1,736 | 57 |
| Cash and cash equivalents in the | ||||||||||||
| acquired business | 38 | 38 | – | 3 | 10 | 7 | – | – | – | 41 | 48 | 7 |
| Transaction expenses | -74 | -74 | 0 | -46 | -56 | -10 | – | -2 | -2 | -120 | -132 | -12 |
| Net cash outflow | -876 | -876 | 0 | -842 | -786 | 56 | -154 | -158 | -4 | -1,872 | -1,820 | 52 |
The fair value of the acquisitions made during 2019 have changed due to the establishment of a final purchase price agreement during 2020.
| SMRT | SMM | SMT | Total | |||||
|---|---|---|---|---|---|---|---|---|
| 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | |
| Contributions as of acquisition date | ||||||||
| Revenues | 83 | 50 | 211 | 25 | – | 79 | 294 | 154 |
| Profit (loss) for the year | -124 | -2 | -26 | -9 | – | 3 | -150 | -8 |
| Contributions if the acquisition date would have been January 1 | ||||||||
| Revenue | 293 | 227 | 447 | 523 | 126 | 79 | 866 | 829 |
| Profit (loss) for the year | -147 | -1 | -9 | 4 | 27 | 3 | -129 | 6 |
In December, Sandvik acquired a minority stake in the privately owned American software company Oqton, a leading provider of AI-powered manufacturing solutions that allows manufacturers to manage, optimize, and automate their manufacturing workflows. This has been recognized as a financial asset.
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 a controlling interest, defacto 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 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.
The business areas use estimates and judgments regarding allocation of goodwill and other surplus values in a business combination.
The divestments of business combinations executed in 2020 are set out below. There were no divestments during 2019.
| Business area | Company/Unit | Divestment date | Annual revenue | No. of employees |
|---|---|---|---|---|
| Other operations | Sandvik Drilling & Completions (Varel) | March 12, 2020 | 2,100 MSEK in 2019 | 1,100 |
| Sandvik Materials Technology | Sandvik Powder Solutions Business | April 6, 2020 | 68 MSEK in 2019 | 30 |
In March, the divestment of Sandvik Drilling and Completions (Varel), meaning the operations related to the oil and gas industry, was completed to the private equity firm Blue Water Energy and its co-investor, the privately owned Nixon Energy Investments. Sandvik still remains as minority owner of 30 percent of the company and holds a position on the board. The remaining holding is incorporated in Group Activities. The contribution to Sandvik's earnings per share from the minority ownership, reported in associated companies, have been limited during the year. The divestment impacted the other operating expenses by SEK -547 million
of which SEK -520 million is the realized effect from reversal of accumulated currency translation in Other comprehensive income. The divestment generated a positive cash flow impact of SEK 704 million net of transaction costs. Sandvik Drilling and Completions (Varel) was presented as other operations in 2019. See below under Assets held for sale.
In April, the divestment of the Sandvik Powder Solutions Business for powder-based HIP products to Metal Technology Co. Ltd. (MTC) was completed but the transaction had no major impact on Sandvik.
| Other operations | SMT | ||
|---|---|---|---|
| Sandvik Drilling & Completions (Varel) |
Sandvik Powder Solutions Business |
Total | |
| Intangible assets | 19 | 77 | 96 |
| Property, plant and equipment | 272 | 21 | 293 |
| Other non-current assets | 62 | 8 | 70 |
| Inventories | 577 | 41 | 618 |
| Receivables | 555 | 13 | 568 |
| Other current assets | 59 | 2 | 61 |
| Cash and cash equivalents | 53 | 0 | 53 |
| Interest-bearing loans and borrowings | -123 | -9 | -132 |
| Other liabilities and provisions | -426 | -50 | -476 |
| Deferred tax assets/liabilities, net | 54 | 4 | 58 |
| Net identifiable assets | 1,102 | 107 | 1,209 |
| Gain (loss) on divestments of business combinations | -547 | -79 | -626 |
| Consideration received after divestment costs | 757 | 28 | 785 |
| Less: Cash and cash equivalents in the divested entities | -53 | 0 | -53 |
| Impact on the Group's cash and cash equivalents, divested operations | 704 | 28 | 732 |
During October 2020 Sandvik signed an agreement to divest its Exploration business to Drillman, a subsidiary of the M Group of companies, which is 100 percent owned and operated in Australia. Drillman provides equipment and technical support to the Geotechnical, Mineral Exploration, Horizontal, Directional and Upstream Gas Drilling sectors, among others. The deal includes exploration rigs, consumables and production stock, along with selected trademarks and patents. The business is currently reported in Sandvik Mining and Rock Technology. Since the recovery of the investment is principally through the sale. the assets and liabilities were classified as a disposal group held for sale. The disposal group was measured at fair value less costs to sell. Closing of the transaction is expected during the first half of 2021.
During October 2019 Sandvik signed an agreement to divest the segment Oil and Gas which is the majority of Drilling and Completions (Varel) to the private equity firm Blue Water Energy and its co-investor, the privately owned Nixon Energy Investments. Since the recovery of the investment principally was through the sale, the assets and liabilities were classified as a disposal group held for sale 2019. The disposal group was measured at fair value less costs to sell. The transaction triggered a write-down of goodwill and other intangible assets in 2019 with an effect on net result of SEK 3,900 million in other operating expenses.
| 2019 | 2020 | |
|---|---|---|
| Intangible assets | 18 | 2 |
| Property, plant and equipment | 249 | -0 |
| Other non-current assets | 169 | 53 |
| Inventories | 571 | 245 |
| Receivables | 729 | 61 |
| Other current assets | 46 | 0 |
| Cash and cash equivalents | 34 | -0 |
| Total assets | 1 815 | 361 |
| Interest-bearing loans and borrowings | 126 | 0 |
| Other liabilities and provisions | 754 | 171 |
| Total liabilities | 880 | 171 |
| Total equity and liabilities | 880 | 171 |
The Mining Systems business was divested to FLSmidth and Nepean already in 2017, however a number of ongoing projects were kept to be delivered by Sandvik in 2017–2019, through an operational agreement with FLSmidth. The majority of the projects were completed by the end of 2019, however Mining Systems still has some personnel and guarantees that expire in 2021.
G32, continued
| 2019 | 2020 | |
|---|---|---|
| Revenue | 295 | 6 |
| Cost of sales and services | -385 | -13 |
| Gross profit | -90 | -8 |
| Selling expenses | -29 | 6 |
| Administrative expenses | -45 | -27 |
| Other operating income | 4 | 2 |
| Other operating expenses | -44 | -5 |
| Operating loss | -204 | -32 |
| Net financial items | -1 | 0 |
| Loss after financial items | -205 | -32 |
| Loss for the year | -205 | -32 |
| 2019 | 2020 | |
|---|---|---|
| Cash flow from operating activities | -152 | -67 |
| Cash flow from investing activities | 16 | 2 |
| Cash flow from financing activities | -2 | -0 |
| Cash flow from discontinued activities | -138 | -66 |
Disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. To be highly probable, actions to complete the transaction are initiated and the transaction is expected to be completed within one year. The disposal group is measured at the lower of the carrying amount and fair value less costs to sell.
An impairment loss is recognized for any initial or subsequent write-down of the disposal group to fair value less costs to sell.
Non-current assets (including those that are part of a disposal group) are not depreciated or amortized while they are classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognized.
Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are presented separately from the other assets in the balance sheet. The liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the balance sheet.
To qualify as discontinued operations, a component of the Group must, in addition to having been classified as a disposal group held for sale, also represent a separate major line of business or be a part of a single coordinated plan to dispose of a separate major line of business.
When the Group disposes of a significant part of its interest, and therefore loses control of a subsidiary, it deconsolidates the subsidiary. If the retained interest in the entity fulfills the criteria of being an associate, it is accounted for at fair value at the disposal date, and subsequently accounted for using the equity method. The gain or loss of the transaction is the difference between the fair value of the consideration received as well as the fair value of the retained interest, and the carrying value of the former subsidiary's net assets (including any related goodwill), and is recorded in the income statement. Any portion of the gain or loss related to the remeasurement of the retained interest to fair value is disclosed separately.
When Sandvik is committed to distribute a disposal group to its owner, assets and liabilities will be reclassified to "held for distribution to owners". Sandvik is committed to the distribution when the disposal group is available for immediate distribution and the distribution is highly probable. To be highly probable, actions to complete the distribution are initiated and the distribution is expected to be completed within one year. The decision of distribution shall have be taken at appropriate level within the organization.
Sandvik has received various forms of government grants in countries where the Group operates of SEK 521 million (48) during 2020. The grants have been recognized as a reduced cost to which the grant is attributable to. The main part is related to personnel costs.
The majority of the grants have no unfulfilled conditions or contingencies attached to the grants.
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 attached 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.
On October 16, 2020, Sandvik announced that it had decided to establish a new business area, Sandvik Rock Processing Solutions, as of January 1, 2021. The new business area will consist of the Crushing and Screening division, which was part of the Sandvik Mining and Rock Technology business area until January 1, 2021. The reason is to further accelerate profitable growth within rock processing. As of January 1, 2021, the remaining operations within Sandvik Mining and Rock Technology changed name to Sandvik Mining and Rock Solutions.
| Income statement | 104 |
|---|---|
| Balance sheet | 105 |
| Changes in equity | 106 |
| Cash flow statement | 107 |
| P1 | Accounting principles | 108 |
|---|---|---|
| P2 | Categories of revenue | 108 |
| P3 | Personnel information and remuneration to management |
108 |
| P4 | Remuneration to auditors | 109 |
| P5 | Research and development | 109 |
| P6 | Other operating income and expenses | 109 |
| P7 | Financial income and expenses | 109 |
| P8 | Income tax | 110 |
| P9 | Intangible assets | 111 |
| P10 | Property, plant and equipment | 112 |
| P11 | Leases | 112 |
| P12 | Shares in group companies | 113 |
| P13 | Non-current receivables and other current receivables |
120 |
| P14 | Inventories | 120 |
|---|---|---|
| P15 | Capital and reserves | 120 |
| P16 | Provisions for pension and other non current post-employment benefits |
121 |
| P17 | Other provisions | 121 |
| P18 | Non-current interest-bearing liabilities | 122 |
| P19 | Accrued expenses and deferred income | 122 |
| P20 | Contingent liabilities and pledged assets | 122 |
| P21 | Transactions with related parties | 122 |
| P22 | Supplementary information to the cash flow statement |
122 |
| P23 | Events after the end of the period | 122 |
| Proposed appropriation of profits | 124 |
| MSEK | Note | 2019 | 2020 |
|---|---|---|---|
| Revenue | P2 | 21,038 | 9,599 |
| Cost of sales and services | -10,038 | -1,877 | |
| Gross profit | 11,000 | 7,722 | |
| Selling expenses | -1,259 | -956 | |
| Administrative expenses | -2,724 | -1,382 | |
| Research and development costs | P5 | -1,588 | -1,386 |
| Other operating income | P6 | 44 | 7 |
| Other operating expenses | P6 | -1,249 | -1,055 |
| Operating profit | P3, P4, P11 | 4,224 | 2,950 |
| Result from shares in group companies | P7 | 11,989 | -1,558 |
| Interest income and similar items | P7 | 485 | 448 |
| Interest expenses and similar items | P7 | -795 | -578 |
| Profit after net financial items | 15,903 | 1,262 | |
| Appropriations | -82 | 2,285 | |
| Income tax | P8 | -684 | -680 |
| Profit for the year | 15,137 | 2,867 |
Profit for the year corresponds to total comprehensive income for the year.
| Assets Non-current assets Intangible assets P9 85 39 Property, plant and equipment P10 7,089 3,219 Financial assets Shares in group companies P12 42,573 43,544 Due from group companies 11,648 10,469 Other investments 2 2 Non-current receivables P13 35 12 Deferred tax assets P8 80 81 Total non-current assets 61,512 57,366 Current assets Inventories P14 3,229 676 Current receivables Trade receivables 798 167 Due from group companies 10,112 5,092 Other receivables P13 451 415 Prepaid expenses and accrued income 695 619 Cash and cash equivalents 0 0 Total current assets 15,285 6,969 Total assets 76,797 64,335 Equity and liabilities Equity Non-distributable equity Share capital 1,505 1,505 Statutory reserve 1,611 1,611 Distributable equity Profit brought forward 16,312 31,748 Profit for the year 15,137 2,867 Total equity P15 34,565 37,731 Untaxed reserves Untaxed reserves 3,222 937 Provisions Provisions for pensions P16 337 303 Other provisions P17 433 447 Total provisions 3,392 1,687 Non-current interest-bearing liabilities Other liabilities P18 15,124 11,346 Non-current non-interest-bearing liabilities Other liabilities 245 123 Current interest-bearing liabilities Loans from financial institutions 99 – Loans from group companies 13,144 7,116 Other liabilities 1,995 3,350 Total current interest-bearing liabilities 30,607 21,935 Current non-interest-bearing liabilities Advance payments from customers 325 26 Accounts payable 1,819 749 Due to group companies 2,226 609 Income tax liabilities P8 604 11 Other liabilities 291 205 Accrued expenses and deferred income P19 2,368 1,383 Total current non-interest-bearing liabilities 7,633 2,982 Equity and liabilities 76,797 64,335 |
MSEK | Note | 31 Dec 2019 | 31 Dec 2020 |
|---|---|---|---|---|
For information on contingent liabilities and pledged assets, refer to note P20.
| Statutory | Distributable | |||
|---|---|---|---|---|
| MSEK | Share capital | reserve | equity | Total equity |
| Equity at January 1, 2019 | 1,505 | 1,611 | 21,715 | 24,831 |
| Comprehensive income for the year | – | – | 15,137 | 15,137 |
| Dividend | – | – | -5,331 | -5,331 |
| Share-based payment settled by equity instruments | – | – | 97 | 97 |
| Reduction of hedge options programs | – | – | -189 | -189 |
| Dividends, hedged options program | – | – | 20 | 20 |
| Equity at December 31, 2019 | 1,505 | 1,611 | 31,449 | 34,565 |
| Equity at January 1, 2020 | 1,505 | 1,611 | 31,449 | 34,565 |
| Comprehensive income for the year | – | – | 2,867 | 2,867 |
| Dividend | – | – | – | – |
| Share-based payment settled by equity instruments | – | – | 34 | 34 |
| Increase of hedge options programs | – | – | 176 | 176 |
| Transfer of equity Sandvik Australian Limited Partnership | – | – | 89 | 89 |
| Equity at December 31, 2020 | 1,505 | 1,611 | 34,615 | 37,731 |
| MSEK | Note | 2019 | 2020 |
|---|---|---|---|
| Cash flow from operating activities | |||
| Profit before tax | 15,821 | 3,547 | |
| Adjustment for depreciation, amortization and impairment losses | 1,163 | 684 | |
| Adjustment for non-cash items, etc | P22 | -222 | -413 |
| Income tax paid | -728 | -1,275 | |
| Cash flow from operating activities before changes in working capital | 16,034 | 2,543 | |
| Changes in working capital | |||
| Changes in inventories | -164 | 2,553 | |
| Changes in operating receivables | 795 | 7,972 | |
| Changes in operating liabilities | 706 | -3,956 | |
| Cash flow from operating activities | 17,371 | 9,112 | |
| Cash flow from investing activities | |||
| Acquisition of companies and shares, net of cash acquired | -11,893 | -1,144 | |
| Acquisition of property, plant and equipment | -976 | -430 | |
| Proceeds from sale of companies and shares, net of cash disposed of | 115 | -2,011 | |
| Proceeds from sale of property, plant and equipment | 136 | 3,923 | |
| Net cash used in investing activities | -12,618 | 338 | |
| Net cash flow after investing activities | 4,753 | 9,450 | |
| Cash flow from financing activities | |||
| Changes in advances/loans to group companies | -1,853 | -1,118 | |
| Changes in advances/loans from group companies | 2,414 | -6,029 | |
| Proceeds from external borrowings | 99 | – | |
| Repayment of external borrowings | -85 | -2,303 | |
| Dividend paid | -5,331 | – | |
| Net cash used in financing activities | -4,756 | -9,450 | |
| Cash flow for the year | -3 | 0 | |
| Cash and cash equivalents at beginning of year | 3 | 0 | |
| Cash and cash equivalents at end of year | 0 | 0 |
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.
The Parent Company generally apply accounting principles as the consolidated financial statements, when an exception is made the accounting principle applied for the Parent Company is presented in the respective note.
The symbol and heading show where the accounting principles are described in the note.
The Parent Company's accounting principles has changed in accordance with the amendments described in the Group in G1.
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.
In the Parent Company, borrowing costs are expensed in the periods to which they relate. Borrowing costs for assets are not capitalized.
| 2019 | 2020 | |
|---|---|---|
| Geographical markets | ||
| Europe | 17,431 | 8,995 |
| North America | 1,410 | 113 |
| South America | 201 | 72 |
| Africa and Middle East | 81 | 80 |
| Asia | 1,809 | 287 |
| Australia and New Zealand | 106 | 52 |
| Total | 21,038 | 9,599 |
| Goods/service lines | ||
| Sale of goods | 20,962 | 9,557 |
| Rendering of services | 66 | 39 |
| Rental income | 10 | 3 |
| Total | 21,038 | 9,599 |
Contract asset and contract liability balances are not disclosed for Parent Company, due to the small balances and corresponding small movements.
Average number of employees was at year end 2020 4,990 (6,711) of which 25 percent were women (23). All personnel in the Parent Company is based in Sweden.
| 2019 | 2020 | |
|---|---|---|
| Wages, salaries and other remuneration | 4,196 | 2,160 |
| Social costs | 1,291 | 770 |
| Pension costs | 571 | 426 |
| Total | 6,058 | 3,356 |
| of which to Boards of Directors and presidents 1) | ||
| Salaries and other remunerations | 39 | 38 |
| Variable salary | 6 | – |
| Pension costs | 23 | 21 |
1) The Parent Company's pension liability relating to these persons amounted to SEK 4 million (4).
| Proportion of women, % | 2019 | 2020 |
|---|---|---|
| Gender distribution in senior management | 27 | 27 |
| Other senior executives | 29 | 29 |
For information regarding incentive programs see note G4.
The Parent Company calculates expenses for defined-benefit 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.
| 2019 | 2020 | |
|---|---|---|
| PwC | ||
| Audit fees | -18 | -16 |
| Audit activities other than the audit assignment | 0 | – |
| Tax consultancy services | 0 | 0 |
| Other services | -20 | -16 |
| Total | -38 | -32 |
| Other audit firms | ||
| Audit fees | 0 | – |
| Audit activities other than the audit assignment | – | – |
| Tax consultancy services | -1 | -1 |
| Other services | -89 | -23 |
| Total | -90 | -24 |
| 2019 | 2020 | |
|---|---|---|
| Expenditure for | ||
| Research and development | -1,655 | -1,386 |
| Quality Assurance | -269 | -35 |
| Total | -1,924 | -1,421 |
| of which expensed, total | -1,858 | -1,421 |
| of which expensed relating to Research and Development |
-1,588 | -1,386 |
The Parent Company's other operating income amounted to SEK 7 million (44). The amount is mainly related to profit from sale of assets of SEK 4 million (31).
The Parent Company's other operating expenses amounted to SEK -1,055 million (-1,249). The main part is royalties between group companies of SEK -830 million (-1,189).
Income from shares in group companies
| 2019 | 2020 | |
|---|---|---|
| Dividend, net of withholding tax | 10,036 | 738 |
| Group contributions paid/received | 1,937 | – |
| Gain or loss on sale of shares and participations | 16 | -2,243 |
| Impairment | – | -53 |
| Total | 11,989 | -1,558 |
| Total | 485 | 448 |
|---|---|---|
| Other | 3 | 11 |
| Derivatives, group companies | – | 5 |
| Other interest income | 0 | 0 |
| Interest income, group companies | 482 | 432 |
| 2019 | 2020 |
| 2019 | 2020 | |
|---|---|---|
| Interest expense, group companies | -154 | -41 |
| Other interest expense | -564 | -521 |
| Derivatives, group companies | -65 | -4 |
| Other | -12 | -12 |
| Total | -795 | -578 |
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. Shareholder 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 IFRS 9. 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.
| Income tax expense for the year | 2019 | 2020 |
|---|---|---|
| Current tax | -1,326 | -624 |
| Adjustment of taxes attributable to prior years | -87 | -57 |
| Total current tax expense | -1,413 | -681 |
| Deferred taxes relating to temporary differences | ||
| and tax losses carried forward | 729 | 1 |
| Total tax expense | -684 | -680 |
The Parent Company's effective tax rate is lower than the nominal tax rate in Sweden, mainly due to received dividends from shares in group companies which are non-taxable incomes.
| 2019 | 2020 | |||
|---|---|---|---|---|
| MSEK | % | MSEK | % | |
| Profit after finanical items | 15,821 | 3,547 | ||
| Weighted average tax based on each country's tax rate |
-3,386 | -21.4 | -759 | -21.4 |
| Tax effect of | ||||
| Non-deductible expenses | -68 | -0.4 | -51 | -1.4 |
| Tax-exempt income | 2,797 | 17.7 | 178 | 5.0 |
| Adjustments relating to prior years | -27 | -0.2 | -57 | -1.6 |
| Other | – | – | 9 | 0.2 |
| Total recognized tax expense | -684 | -4.3 | -680 | -19.2 |
Deferred tax assets and liabilities
The deferred tax assets and liabilities recognized in the balance sheet are attributable to the following assets and liabilities.
| 2019 | 2020 | |||||
|---|---|---|---|---|---|---|
| Deferred tax assets |
Deferred tax liabilities |
Net | Deferred tax assets |
Deferred tax liabilities |
Net | |
| Property, plant and equipment | – | -24 | -24 | – | -24 | -24 |
| Inventories | 6 | – | 6 | 6 | – | 6 |
| Provisions | 76 | -21 | 55 | 86 | -11 | 75 |
| Non-interest-bearing assets and liabilities |
43 | – | 43 | 25 | -1 | 24 |
| Total | 125 | -45 | 80 | 117 | -36 | 81 |
| Offsetting | -125 | 125 | – | -117 | 117 | – |
| Total deferred tax assets and liabilities | – | 80 | 80 | – | 81 | 81 |
| 2019 | 2020 | |
|---|---|---|
| Balance at the beginning of the year, net | -649 | 80 |
| Recognized in profit and loss | 729 | 1 |
| Balance at end of year, net | 80 | 81 |
In addition to the deferred tax assets and liabilities. Sandvik reports the following tax liabilities and receivables:
| Net tax liabilities/receivables | -604 | -11 |
|---|---|---|
| Income tax receivables | – | – |
| Income tax liabilities | -604 | -11 |
| 2019 | 2020 |
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.
| Patents and other | |||
|---|---|---|---|
| intangible assets | Goodwill | Total | |
| Cost | |||
| At January 1, 2019 | 123 | 139 | 262 |
| Additions | 17 | – | 17 |
| Divestments and disposals | -20 | – | -20 |
| At December 31, 2019 | 120 | 139 | 259 |
| Accumulated amortization | |||
| At January 1, 2019 | 97 | 58 | 155 |
| Divestments and disposals | -20 | – | – |
| Amortization for the year | 11 | 28 | 39 |
| At December 31, 2019 | 88 | 86 | 174 |
| Net carrying amount | |||
| At December 31, 2019 | 32 | 53 | 85 |
| Patents and other | |||
|---|---|---|---|
| intangible assets | Goodwill | Total | |
| Cost | |||
| At January 1, 2020 | 120 | 139 | 259 |
| Additions | 4 | – | 4 |
| Divestments and disposals | -40 | – | -40 |
| Reclassifications | 3 | – | 3 |
| At December 31, 2020 | 87 | 139 | 226 |
| Accumulated amortization | |||
| At January 1, 2020 | 88 | 86 | 174 |
| Divestments and disposals | -22 | – | -22 |
| Amortization for the year | 8 | 27 | 35 |
| At December 31, 2020 | 74 | 113 | 187 |
| Net carrying amount | |||
| At December 31, 2020 | 13 | 26 | 39 |
| 2019 | 2020 | |
|---|---|---|
| Administrative expenses | 39 | 35 |
| Total | 39 | 35 |
The Parent Company recognizes all expenditure for research and development conducted on a proprietary basis as an expense in profit or loss.
Intangible assets are amortized on a straight-line basis over the estimated useful lives. Intangible assets are amortized from the date they are available to use. The estimated useful lives are as follows:
| – Patents | 10–20 years |
|---|---|
| – Goodwill | 10 years |
| Land and buildings |
Plant and machinery |
Equipment, fixtures and fittings |
Construction in progress |
Total | |
|---|---|---|---|---|---|
| Cost | |||||
| At January 1, 2019 | 1,724 | 14,365 | 1,508 | 1,537 | 19,134 |
| Additions | 14 | 178 | 61 | 706 | 959 |
| Divestments and disposals | -13 | -496 | -105 | -66 | -680 |
| Reclassifications | 31 | 813 | 101 | -945 | – |
| At December 31, 2019 | 1,756 | 14,860 | 1,565 | 1,232 | 19,413 |
| Revaluations | |||||
| At January 1, 2019 | 39 | – | – | – | 39 |
| Divestments and disposals | -3 | – | – | – | -3 |
| At December 31, 2019 | 36 | – | – | – | 36 |
| Accumulated depreciation and impairment losses | |||||
| At January 1, 2019 | 778 | 10,207 | 1,135 | – | 12,120 |
| Divestments and disposals | -9 | -471 | -103 | – | -583 |
| Reclassifications | 0 | 0 | – | – | – |
| Depreciation for the year | 51 | 680 | 92 | – | 823 |
| At December 31, 2019 | 820 | 10,416 | 1,124 | – | 12,360 |
| Net carrying amount | |||||
| At December 31, 2019 | 972 | 4,444 | 441 | 1,232 | 7,089 |
| Land and | Plant and | Equipment, fixtures | Construction in | ||
|---|---|---|---|---|---|
| buildings | machinery | and fittings | progress | Total | |
| Cost | |||||
| At January 1, 2020 | 1,756 | 14,860 | 1,565 | 1,232 | 19,413 |
| Additions | 28 | 52 | 32 | 318 | 430 |
| Divestments and disposals | -201 | -9,702 | -702 | -514 | -11,119 |
| Reclassifications | 59 | 221 | 73 | -383 | -30 |
| At December 31, 2020 | 1,642 | 5,431 | 968 | 653 | 8,694 |
| Revaluations | |||||
| At January 1, 2020 | 36 | – | – | – | 36 |
| Divestments and disposals | -0 | – | – | – | 0 |
| At December 31, 2020 | 36 | 0 | 0 | – | 36 |
| Accumulated depreciation and impairment losses | |||||
| At January 1, 2020 | 820 | 10,416 | 1,124 | – | 12,360 |
| Divestments and disposals | -95 | -6,593 | -530 | – | -7,218 |
| Reclassifications | – | -30 | – | – | -30 |
| Depreciation for the year | 46 | 252 | 78 | – | 376 |
| Impairment losses | – | 23 | – | – | 23 |
| At December 31, 2020 | 771 | 4,068 | 672 | – | 5,511 |
| Net carrying amount | |||||
| At December 31, 2020 | 907 | 1,363 | 296 | 653 | 3,219 |
| 2019 | 2020 | |
|---|---|---|
| Within one year | 135 | 117 |
| Between one and five years | 374 | 279 |
| Later than five years | 223 | 191 |
| Net carrying amount | 732 | 587 |
Leasing fees for assets under operating leases, such as leased premises, machinery and office equipments are recognized within operating expenses. In 2020, the Parent Company expensed SEK 159 million.
No future minimum lease payments under non-cancellable operating lease contracts (0).
The Parent Company recognizes all lease contracts according to the rules for operating leases.
| 2019 | 2020 | |
|---|---|---|
| Cost | ||
| At the beginning of the year | 31,528 | 43,044 |
| Additions | 5,825 | 349 |
| Capital contributions | 6,068 | 1,136 |
| Captial reductions | -27 | – |
| Divestment | -350 | -460 |
| At the end of the year | 43,044 | 44,069 |
| Accumulated impairment losses | ||
| At the beginning of the year | -751 | -471 |
| Impairment losses for the year | – | -54 |
| Impairment reversed for the year | 280 | – |
| At the end of the year | -471 | -525 |
| Accumulated revaluations | ||
| At the beginning of the year | 0 | 0 |
| At the end of the year | 0 | 0 |
| Carrying amount at year-end | 42,573 | 43,544 |
Sandvik AB's holdings of shares and participations in subsidiaries, direct holdings, according to balance sheet at December 31
| 2019 | 2020 | ||||||
|---|---|---|---|---|---|---|---|
| Carrying | Carrying | ||||||
| Corp. Reg. | Holding, | amount | Holding, | amount | |||
| Company, domicile | number | No. of shares | %2) | 000s SEK No. of shares | %2) | 000s SEK | |
| SWEDEN | |||||||
| Gimo Utbildningsaktiebolag, Gimo | 556061–4041 | 1,000 | 91 | 3,656 | 1,000 | 91 | 7,527 |
| Industri AB Skomab, Sandviken | 556008–8345 | 2,000 | 100 | 21,946 | 2,000 | 100 | 21,946 |
| Sandvik Global Purchasing AB, Stockholm | 556052–4315 | 1,000 | 100 | 50 | 1,000 | 100 | 50 |
| AB Sandvik Coromant, Sandviken1) | 556234–6865 | 1,000 | 100 | 50 | 1,000 | 100 | 50 |
| Sandvik Coromant Sverige AB, Stockholm1) | 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 | 81,000 | 1,500 | 100 | 81,000 |
| Sandvik Besöksservice AB, Sandviken1) | 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, Sandviken1) | 556147–2977 | 1,000 | 100 | 50 | 1,000 | 100 | 50 |
| Sandvik Materials Technology EMEA AB, Stockholm | 556734–2026 | 501,000 | 100 | 5,782,350 | 501,000 | 100 | 6,623,705 |
| Sandvik Construction AB, Sandviken1) | 556664–9983 | 1,000 | 100 | 100 | 1,000 | 100 | 100 |
| Sandvik Mining and Construction Sverige AB, Sandviken1) 556288–9443 | 1,000 | 100 | 50 | 1,000 | 100 | 50 | |
| Sandvik Mining and Construction Tools AB, Sandviken1) | 556234–7343 | 1,000 | 100 | 50 | 1,000 | 100 | 50 |
| Sandvik Rotary Tools AB, Köping | 556191–8920 | 101,000 | 100 | 103,231 | 101,000 | 100 | 103,231 |
| 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 |
| Sanrip AB, Sandviken1) | 556692–0038 | 1,000 | 100 | 100 | 1,000 | 100 | 100 |
| Sandvik Machining Solutions AB, Sandviken1) | 556692–0053 | 1,000 | 100 | 100 | 1,000 | 100 | 100 |
| Sandvik Utbildnings AB, Sandviken | 556304–8791 | 910 | 91 | 28,342 | 910 | 91 | 37,947 |
| Sandvikens Brukspersonals Byggnadsförening upa, | |||||||
| Sandviken | 785500–1686 | – | 100 | 0 | – | 100 | 0 |
| Dormer Pramet AB, Halmstad | 556240–8210 | 80,000 | 100 | 46,145 | 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, Köping1) | 556776–9525 | 1,000 | 100 | 100 | 1,000 | 100 | 100 |
| Wire Sandviken AB, Sandviken1) | 556779–3897 | 1,000 | 100 | 100 | 1,000 | 100 | 100 |
| Sandvik IT Services AB, Sandviken1) | 556788–9059 | 1,000 | 100 | 100 | 1,000 | 100 | 100 |
| Sandvik Venture AB, Stockholm1) | 556868–7155 | 1,000 | 100 | 100 | 1,000 | 100 | 281048 |
| Sandvik Credit AB, Stockholm | 556843–7296 | 10,000 | 100 | 75,000 | 10,000 | 100 | 75,000 |
| Seco Tools AB, Fagersta | 556071–1060 | 145,467,690 | 100 | 15,658,859 145,467,690 | 100 | 15,658,859 | |
| Sandvik PT AB, Sandviken | 556207–5191 | 2,500 | 100 | 4,740,600 | 2,500 | 100 | 4,740,600 |
| Goldcup 26940 AB | 559291–1035 | – | – | – | 25,000 | 100 | 25 |
| Goldcup 26939 AB | 559291–1027 | – | – | – | 25,000 | 100 | 25 |
| Goldcup 26938 AB | 559291–1019 | – | – | – | 25,000 | 100 | 25 |
1) Subsidiaries conducting business on behalf of the Parent Company.
2) Refers to voting rights, which also equals share of capital unless otherwise indicated.
P12, continued
| 2019 | 2020 | ||||||
|---|---|---|---|---|---|---|---|
| Carrying | Carrying | ||||||
| Holding, | amount | Holding, | amount | ||||
| Country/Location | Company | No. of shares | %2) | 000s SEK No. of shares | %2) | 000s SEK | |
| Australia | Sandvik Australia Pty. Ltd. | – | 253,4) | 235,382 | – | – | – |
| Sandvik Australian Ltd. Partnership | – | 99 | – | – | – | – | |
| Brazil | Sandvik Holding Do Brasil Ltda | 339,135,756 | 100 | 790,695 339,135,756 | 100 | 790,695 | |
| Bulgaria | Sandvik Bulgaria Ltd. | – | 100 | 0 | – | 100 | 0 |
| Chile | Sandvik Credit Chile S.A. | 9,900 | 99 | 165,331 | 9,900 | 99 | 165,331 |
| China | Sandvik China Holding Co Ltd. | – | 100 233) |
1,579,078 | – | 100 233) |
1,579,078 |
| Sandvik Materials Technology (China) Ltd. | – | 282,749 | – | 230,343 | |||
| Czech Republic | Sandvik CZ s.r.o. | – | 100 | 0 | – | 100 | 0 |
| Democratic Repub lic of Congo |
Sandvik Mining and Construction DRC S.P.R.L. | 9990 | 100 | 4898 | 9990 | 100 | 4,898 |
| Hungary | Sandvik Magyarorszag Kft. | – | 100 | 3,258 | – | 100 | 3,258 |
| India | Sandvik Asia Ltd. | 1,801,241 | 755) | 252,481 | 1,801,241 | 755) | 252,481 |
| Sandvik Materials Technology India Private Ltd. | – | – | – | 1,801,241 | 755) | 2,084 | |
| Sandvik Mining and Rock Technology India Private | |||||||
| Ltd. | – | – | – | 1,801,241 | 755) | 2,084 | |
| Ireland | Sandvik Mining and Construction Logistics Ltd. | 100 | 100 | 5,508 | 100 | 100 | 5,508 |
| Japan | Sandvik Materials Technology Japan K.K. | 2,780,000 | 100 | 224,701 | – | – | – |
| Sandvik K.K. | – | – | – | 8,000 | 100 | 224,207 | |
| Korea | Sandvik Korea Ltd. | 752,730 | 100 | 20,185 | 752,730 | 100 | 20,185 |
| 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) | 712,312 406,642,873 | 903) | 712,312 | |
| 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 |
| Frost Holding B.V. | 1 | 100 | 1105 | 1 | 100 | 0 | |
| Peru | Sandvik del Perú S.A. | 6,562,795 | 903) | 26,025 | 6,562,795 | 903) | 26,025 |
| Russia | Sandvik LLC | – | – | – | – | 100 | 67,238 |
| Sandvik Mining and Constructiion CIS LLC | – | – | – | – | 100 | 45,015 | |
| Serbia | Sandvik Mining and Rock Technology LLC Belgrade | – | – | – | – | 100 | 7,898 |
| Slovakia | Sandvik Slovakia s.r.o. | – | 100 | 1,238 | – | 100 | 1,238 |
| South Africa | Sandvik Holding Southern Africa (Pty) Ltd | 1107501 | 100 | 1,084,567 | 1,107,501 | 100 | 1,084,567 |
| 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 | 42,573,113 | 43,543,899 |
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 76 percent.
5) Shares up to an ownership interest of 100 percent are held by other group companies.
| Country/Location | Company | 2019 | 2020 |
|---|---|---|---|
| Sweden | Sandvik Materials Technology StripTech AB | – | 100 |
| Sandvik Treasury AB | 100 | 100 | |
| Sandvik Materials Technology Treasury AB | 100 | 100 | |
| Metrolog Services Nordic AB | 100 | 100 | |
| SETP Invest AB | 100 | 100 | |
| Sandvik Invest Aktiebolag | 100 | 100 | |
| Seco AB | 100 | 100 | |
| Pramet Scandinavia AB | 100 | 100 | |
| AB Sandvik Materials Technology | – | 100 | |
| Kanthal AB | 100 | 100 | |
| Sandvik Powder Solutions AB | 100 | – | |
| Sandvik Mining and Construction Haparanda AB | 100 | 100 | |
| Sandvik SRP AB | 100 | 100 | |
| JV Rock Drill Steel | – | 100 | |
| Argentina | ESIP Energy S.A. | 50 | – |
| Seco Tools Argentina S.A. | 100 | 100 | |
| Sandvik Argentina S.A. | 100 | 100 | |
| Sandvik Mining and Construction Argentina S.A. | 100 | 100 | |
| Armenia | Sandvik Mining and Rock Technology AM LLC | 100 | 100 |
| Australia | Sandvik Australia Pty Ltd | 100 | 100 |
| Sandvik Financial Services Pty Ltd | 100 | 100 | |
| Sandvik Australian Limited Partnership | 100 | 100 | |
| Sandvik Mining and Construction Australia (Production/Supply) Pty Ltd | 100 | 100 | |
| NTX Australia Pty Ltd | 100 | 100 | |
| Terelion (Australia) Pty Ltd | 100 | 100 | |
| Seco Tools Australia Pty Ltd | 100 | 100 | |
| Sandvik Australia Holdings Pty Ltd | 100 | 100 | |
| Sandvik Mining and Construction Australia Pty Ltd | 100 | 100 | |
| Austria | Sandvik in Austria Gesellschaft GmbH | 100 | 100 |
| Walter Austria GmbH | 100 | 100 | |
| Wolfram Bergbau und Hütten AG | 100 | 100 | |
| Seco Tools Gesellschaft GmbH | 100 | 100 | |
| Sandvik Mining and Construction G.m.b.H. | 100 | 100 | |
| Sandvik Mining and Construction Materials Handling GmbH & Co KG | 100 | 100 | |
| Sandvik Mining and Construction Materials Handling GmbH | 100 | 100 | |
| Belarus | OOO Walter Tools | – | 100 |
| Belgium | Walter Benelux N.V./S.A. | 100 | 100 |
| S.A. Seco Tools Benelux N.V. | 100 | 100 | |
| Botswana | Sandvik Botswana (Pty) Ltd | 100 | 100 |
| Brazil | Sandvik Coromant Do Brasil Industria e Comercio de Ferramentas Ltda | 100 | 100 |
| Walter do Brazil Ltda | 100 | 100 | |
| Dormer Pramet Solucoes Para Usinagem Ltda | 100 | 100 | |
| Sandvik Materials Technology do Brasil Industria e Comercio Ltda | 100 | 100 | |
| Sandvik Holding do Brazil Ltda Seco Tools Indústria e Comércio Ltda. |
100 100 |
100 100 |
|
| Sandvik MGS S.A. | 100 | 100 | |
| Sandvik Mining and Rock Technology do Brasil Ltda | 100 | 100 | |
| CGTech Brasil Consultoria de Software Eireli | – | 100 | |
| Burkina Faso | Sandvik Mining and Rock Technology Burkina Faso SARL | 100 | 100 |
| Canada | Systéme Guardian Inc. | 100 | 100 |
| Sandvik Canada, Inc. | 100 | 100 | |
| Sandvik Materials Technology Canada, Inc. | – | 100 | |
| Newtrax Holdings Inc | 100 | 100 | |
| Inrock Ltd. | 100 | 100 | |
| Newtrax Technologies Inc | 100 | 100 | |
| Varel Rock Bits Canada Inc | 100 | – | |
| Artisan Vehicles, Inc. | 100 | 100 | |
| Chile | Sandvik Chile S.A. | 100 | 100 |
| NTX Chile SpA | 100 | 100 | |
| Sandvik Financial Services S.A. | 100 | 100 | |
| Sandvik Mining and Construction Chile S.A. | 100 | 100 |
1) Refers to share of capital, which also corresponds to voting rights for the total number of shares unless otherwise stated.
| Country/Location China |
Company Sandvik Tooling Production (Langfang) Co. Ltd |
2019 100 |
2020 100 |
|---|---|---|---|
| Sandvik Materials Technology (China) Co., Ltd | 100 | 100 | |
| Sandvik International Trading (Shanghai) Co Ltd | 100 | 100 | |
| Walter Wuxi Co. Ltd. | 100 | 100 | |
| Sandvik Coromant Cutting Tools (Shanghai) Ltd | 100 | 100 | |
| Sandvik Rock Tools Technology (Wuxi) Co., Ltd | 100 | 100 | |
| Varel Beijing Trading Co Ltd | 100 | – | |
| Dormer Tools (Shanghai) Co Ltd | 100 | 100 | |
| Sandvik Logistics (Shanghai) Co. Ltd | 100 | 100 | |
| Seco Tools (Shanghai) Co Ltd | 100 | 100 | |
| Kunshan OSK Precision Tools Co., Ltd | 100 | 100 | |
| Seco Tools Manufacturing (Shanghai) Co Ltd | 100 | 100 | |
| Pramet Tools (Shanghai) Co Ltd | 100 | 100 | |
| Sandvik Mining and Construction Trading (Shanghai) Co. | 100 | 100 | |
| Shanghai Jianshe Luqiao Machinery Co. Ltd | 80 | 80 | |
| Shandong Energy Machinery Group ZhongRui Minig Equipment 2) | 50 | 50 | |
| Sandvik Mining and Construction (China) Co Ltd | 100 | 100 | |
| Sandvik Mining and Construction (Luoyang) Co Ltd | 100 | 100 | |
| Jinan Lingong Mining and Rock Technology Co Ltd | 65 | 65 | |
| Beijing CGTech Software Co., Ltd. | – | 100 | |
| Colombia | Sandvik Colombia S.A.S. | 100 | 100 |
| Czech Republic | Sandvik Chomutov Precision Tubes Spol. s.r.o. | 100 | 100 |
| WALTER CZ s.r.o. | 100 | 100 | |
| Seco Tools CZ s.r.o. | 100 | 100 | |
| Dormer Pramet s.r.o. | 100 | 100 | |
| Denmark | Sandvik A/S | 100 | 100 |
| Seco Tools A/S | 100 | 100 | |
| DR Congo | Sandvik Mining & Construction DRC S.P.R.L | 100 | 100 |
| Finland | Seco Tools Oy | 100 | 100 |
| Sandvik Mining and Construction Oy | 100 | 100 | |
| Sandvik Mining and Construction Finland OY | 100 | 100 | |
| Tamrock Oy | 100 | 100 | |
| Oy Tampella Ab | 100 | 100 | |
| Sandvik Coromant Finland Oy | 100 | 100 | |
| Tammerfors Linne och Jern Ab | 100 | 100 | |
| France | Sandvik Holding France S.A.S | 100 | 100 |
| Sandvik Tooling France S.A.S Sandvik Materials Technology France SAS |
100 100 |
100 100 |
|
| Walter France S.A.S. | 100 | 100 | |
| Gunther Tools | 100 | 100 | |
| Varel Europe S.A.S. | 100 | – | |
| Sandvik Coromant Inserts France S.A.S | 100 | 100 | |
| Sandvik Mining and Construction Lyon S.A.S | 100 | 100 | |
| Sandvik Mining and Construction France S.A.S | 100 | 100 | |
| Financiere Metrolog SAS | 100 | 100 | |
| Metrologic Group SAS | 100 | 100 | |
| Metrologic Services SAS | 100 | 100 | |
| A.O.B. S.A.S | 100 | 100 | |
| Seco Tools France S.A.S. | 100 | 100 | |
| SECO Tools tooling systems SAS | 100 | 100 | |
| Seco Ressources et Finances SA | 100 | 100 | |
| Seco Tools Reaming SAS | 100 | 100 | |
| CGTech S.A.R.L. | – | 100 | |
| Gabon | Varel Gabon SARL | 100 | – |
| Germany | Sandvik Materials Technology Deutschland GmbH | 100 | 100 |
| Walter Deutschland GmbH | 100 | 100 | |
| Sandvik Tooling Deutschland GmbH | 100 | 100 | |
| Walter AG | 100 | 100 | |
| TDM Systems GmbH | 100 | 100 | |
| Comara GmbH | 100 | 100 | |
| Werner Schmitt PKD-Werkzeug GmbH | 100 | 100 | |
| Prototyp-Werke GmbH | 100 | 100 |
2) Share of votes 60% (60).
| Country/Location | Company | 2019 | 2020 |
|---|---|---|---|
| Germany | Metrologic Group GmbH | 100 | 100 |
| Protomedical GmbH | 100 | 100 | |
| Kanthal GmbH | – | 100 | |
| Sandvik Mining and Construction Deutschland GmbH | 100 | 100 | |
| Sandvik Mining and Construction Central Europe GmbH | 100 | 100 | |
| Sandvik Mining and Construction Crushing Technology GmbH | 100 | 100 | |
| Seco Tools GmbH | 100 | 100 | |
| Sandvik Holding GmbH | 100 | 100 | |
| CGTech Deutschland GmbH | – | 100 | |
| Ghana | Sandvik Mining & Construction Ghana Limited | 100 | 100 |
| Hong Kong | Smooth Team Investments Limited | 100 | 100 |
| Sandvik Hongkong Ltd BA SMC | 100 | 100 | |
| Hungary | Walter Hungaria Kft | 100 | 100 |
| Seco Tools Kft | 100 | 100 | |
| Pramet Kft | 100 | 100 | |
| India | Sandvik Asia Private Limited | 100 | 100 |
| Walter Tools India Private Limited | 100 | 100 | |
| Seco Tools India Private Limited | 100 | 100 | |
| Dormer Tools India Private Limited | 100 | 100 | |
| Sandvik Materials Technology India Private Limited | – | 100 | |
| Sandvik Mining and Rock Technology India Private Limited | – | 100 | |
| CGTech India Software Solutions Private Limited | – | 100 | |
| Indonesia | PT Sandvik Indonesia | 100 | 100 |
| PT Sandvik Mining and Construction Indonesia | 100 | 100 | |
| PT Seco Tools Indonesia | 100 | 100 | |
| PT Sandvik SMC | 100 | 100 | |
| Ireland | Diamond Innovations International Sales | 100 | 100 |
| Italy | Sandvik Italia S.p.A. | 100 | 100 |
| SSC Holding Italia SRL | 100 | 100 | |
| Walter Italia SRL | 100 | 100 | |
| Metrologic Group Italia S.R.L. | 100 | 100 | |
| Seco Tools Italia S.p.A SU | 100 | 100 | |
| Sandvik Materials Technology Italia S.R.L. | – | 100 | |
| CGTech s.r.l. | – | 100 | |
| Japan | Sandvik Materials Technology K.K. | 100 | 100 |
| Sandvik KK | – | 100 | |
| Walter Japan K.K. | 100 | 100 | |
| Seco Tools Japan K.K. | 100 | 100 | |
| Sandvik Tooling Supply Japan K.K. | 100 | 100 | |
| Kabushiki Kaisha CGTech | – | 100 | |
| Kazakhstan | Sandvik Mining and Construction Kazakhstan Ltd | 100 | 100 |
| Korea | Walter Korea Ltd | 100 | 100 |
| Sandvik Materials Technology Korea Co., Ltd. | – | 100 | |
| Seco Tools Korea Ltd | 100 | 100 | |
| Sandvik SuhJun Ltd | 100 | 100 | |
| CGTech Co., Ltd. | – | 100 | |
| Malaysia | Sandvik Malaysia Sdn Bhd | 100 | 100 |
| Seco Tools Sdn Bhd | 100 | 100 | |
| Walter Malaysia Sdn Bhd | 100 | 100 | |
| Downhole Products Asia Sdn Bhd | 100 | – | |
| Sandvik Mining And Construction (M) Sdn Bhd | 100 | 100 | |
| Mexico | NTX Mining Services S de RL de CV | 100 | 100 |
| Sandvik SA de CV | 100 | 100 | |
| Sandvik Hard Materials de Mexico S.A. de C.V. | 100 | 100 | |
| Sandvik Materials Technology Mexico S.A. de C.V. | – | 100 | |
| Walter Tools S.A. de C.V. | 100 | 100 | |
| Sandvik de Mexicana S.A. | 100 | 100 | |
| Varel de Mexico S.A. de C.V. | 100 | 100 | |
| Varel International de Mexico S.A. de C.V. | 100 | – | |
| Valenite de Mexico | 100 | 100 | |
| Seco Tools de Mexico S.A. de C.V. | 100 | 100 | |
| Sandvik Mining and Construction de Mexico S.A. de C.V. | 100 | 100 |
| Country/Location | Company | 2019 | 2020 |
|---|---|---|---|
| Morocco | Seco Tools S.A. | 100 | 100 |
| Mozambique | Sandvik Mining & Construction Mozambique Lda | 100 | 100 |
| Namibia | Sandvik Namibia (Pty) Ltd | 100 | 100 |
| Netherlands | Sandvik Benelux B.V. | 100 | 100 |
| Sandvik DC Venlo BV | 100 | 100 | |
| Jabro Tools BV | 100 | 100 | |
| Sandvik Mining and Construction B.V. | 100 | 100 | |
| New Zealand | Sandvik New Zealand Ltd | 100 | – |
| Nigeria | Sandvik Mining & Construction Nigeria Limited | 100 | 100 |
| Varel International Nigeria Limited | 75 | – | |
| Norway | Sandvik Teeness AS | 100 | 100 |
| Seco Tools AS | 100 | 100 | |
| Sandvik Norge AS | 100 | 100 | |
| Papua New Guinea | Sandvik Mining and Construction PNG Limited | 100 | 100 |
| Peru | Sandvik del Peru S.A. | 100 | 100 |
| Newtrax Peru Sociedad Anonima Cerrada | 100 | 100 | |
| Sandvik Forestal S.A. | 100 | 100 | |
| Varel International Industries L.P Sucursal Del Peru | 100 | – | |
| Philippines | Sandvik Philippines Inc | 100 | 100 |
| Sandvik Tamrock Philippines Inc | 100 | 100 | |
| Poland | Sandvik Polska Sp. Z.o.o. | 100 | 100 |
| Walter Polska SP. Z.o.o. | 100 | 100 | |
| Seco Tools Sp Z.o.o. | 100 | 100 | |
| Pramet Sp. Z.o.o. | 100 | 100 | |
| Portugal | Seco Tools Portugal Lda | 100 | 100 |
| Romania | Sandvik SRL | 100 | 100 |
| Walter Tools SRL | 100 | 100 | |
| Seco Tools Romania SRL | 100 | 100 | |
| Russia | Newtrax Rus LLC | 100 | 100 |
| LLC Walter | 100 | 100 | |
| Sandvik MKTC OAO | 100 | 100 | |
| LLC Sandvik | 100 | 100 | |
| Varel NTS, LLC | 100 | – | |
| LLC Pramet | 100 | 100 | |
| LLC Seco Tools | 100 | 100 | |
| Sandvik Mining and Construction CIS LLC | 100 | 100 | |
| Saudi Arabia | Varel Arabia Company Limited | 75 | – |
| Serbia | Seco Tools SRB d.o.o. | 100 | 100 |
| Sandvik Mining & Rock Technology LLC Belgrade | – | 100 | |
| Singapore | Walter AG Singapore Pte Ltd | 100 | 100 |
| Sandvik South East Asia Ptd Ltd | 100 | 100 | |
| Seco Tools (SEA) Pte Ltd | 100 | 100 | |
| Sandvik Materials Technology Singapore Pte. Ltd. | – | 100 | |
| Sandvik Mining and Construction S.E. Asia Pte Ltd | 100 | 100 | |
| Slovakia | PRAMET Slovakia spol sro | 100 | 100 |
| Walter Slovakia s.r.o. | 100 | 100 | |
| Seco Tools SK, s.r.o. | 100 | 100 | |
| Slovenia | Sandvik D.o.o. | 100 | – |
| Walter Tools, d.o.o. | 100 | 100 | |
| Seco Tools SI d.o.o. | 100 | 100 | |
| South Africa | Sandvik (Pty) Ltd | 100 | 100 |
| Newtrax Pty. Ltd | 100 | 100 | |
| Sandvik Financial Services (Pty) Ltd | 100 | 100 | |
| Seco Tools South Africa (Pty) Ltd | 100 | 100 | |
| Sandvik Mining RSA (Pty) Ltd | 75 | 75 | |
| Sandvik Mining & Construction Delmas (Pty) Ltd | 100 | 100 | |
| Spain | Sandvik Espanola | 100 | 100 |
| Sandvik Materials Technology Spain S.L. | – | 100 | |
| Walter Tools Iberica S.A.U. | 100 | 100 | |
| Metrologic Group Spain S.L. | 100 | 100 | |
| Seco Tools Espana S.A. | 100 | 100 |
| Country/Location | Company | 2019 | 2020 |
|---|---|---|---|
| Switzerland | Sandvik Holding AG | 100 | 100 |
| Sandvik AG | 100 | 100 | |
| Sandvik Materials Technology Santrade AG | – | 100 | |
| Walter (Schweiz) AG | 100 | 100 | |
| Santrade Ltd | 100 | 100 | |
| Varel International Engineering Resources SA | 100 | – | |
| Seco Tools AG | 100 | 100 | |
| Taiwan | Sandvik Taiwan Ltd | 100 | 100 |
| Seco Tools (S.E.A.) Taiwan Branch | 100 | 100 | |
| Tanzania | Sandvik Mining & Construction Tanzania Limited | 98 | 98 |
| Thailand | Sandvik Thailand Limited | 91 | 91 |
| Walter (Thailand) Co Ltd | 100 | 100 | |
| Seco Tools (Thailand) Co Ltd | 100 | 100 | |
| Turkey | Walter Cutting Tools Industry and Trade LLC | 100 | 100 |
| Seco Tools Kesici Takimlar Makina San.Tic.A.S. | 100 | 100 | |
| Ukraine | LLC Seco Tools Ukraine | 100 | 100 |
| Sandvik Ukraine | 100 | 100 | |
| United Arab Emirates | Downhole Products Middle East Fze | 100 | – |
| United Kingdom | Sandvik Holdings Ltd | 100 | 100 |
| Sandvik Materials Limited | 100 | 100 | |
| Sandvik Ltd | 100 | 100 | |
| Walter GB Ltd | 100 | 100 | |
| Dormer Pramet Ltd | 100 | 100 | |
| BTA Heller Drilling Systems Ltd | 100 | 100 | |
| Inrock Ltd. (UK) | 100 | 100 | |
| Varel (UK) Limited | 100 | – | |
| Downhole Products UK Holdco II Limited | 100 | – | |
| Downhole Products UK Holdco Limited | 100 | – | |
| Downhole Products Limited | 100 | – | |
| Ian Hay (Engineering) Ltd | 100 | – | |
| Seco Tools (UK) Limited | 100 | 100 | |
| Tamrock Great Britain Holdings Ltd | 100 | 100 | |
| Fintec Crushing and Screening Limited | 100 | 100 | |
| Sandvik Osprey Ltd | 100 | 100 | |
| CGTech Ltd. | – | 100 | |
| USA | Sandvik Special Metals LLC | 100 | 100 |
| PennPower Inc | 100 | 100 | |
| Sandvik, Inc. | 100 | 100 | |
| Sandvik Financial Services LLC | 100 | 100 | |
| Walter USA LLC | 100 | 100 | |
| TDM Systems Inc | 100 | 100 | |
| Sandvik Machining Solutions USA LLC | 100 | 100 | |
| Dura-Mill, Inc. | 100 | 100 | |
| Allied Construction LLC | 20 | 100 | |
| Advanced Theodolite Technology, Inc. | 100 | 100 | |
| Metrologic Group Services, Inc. | 100 | 100 | |
| MG USA Properties, Inc. | 100 | 100 | |
| Precorp Inc | 100 | 100 | |
| uFab LLC | 100 | 100 | |
| Dormer Pramet LLC | 100 | 100 | |
| Varel Group | 100 | – | |
| Varel International Energy Services Inc. | 100 | – | |
| Varel International Holdings Inc | 100 | – | |
| Valenite LLC | 100 | 100 | |
| Sandvik Materials Technology LLC | 100 | 100 | |
| Varel International Ind. LLC | 100 | – | |
| Downhole Products Holdings USA Inc. | 100 | – | |
| Aberdeen Products, Inc. | 100 | – | |
| Varel Newtech Holdings Inc | 50 | – | |
| Wetmore Tool and Engineering Company | 100 | 100 | |
| Artisan Vehicle Systems, Inc. | 100 | 100 | |
| Tamcorp Inc USA | 100 | 100 |
| Country/Location | Company | 2019 | 2020 |
|---|---|---|---|
| USA | Thermaltek LLC | 100 | 100 |
| Summerill High Precision LLC | – | 100 | |
| Inrock Drilling Systems, inc. | 100 | 100 | |
| Inrock Acquisitions, Inc. | 100 | 100 | |
| Pennsylvania Extruded Tube Co. (PEXCO) | 70 | 70 | |
| Diamond Tool Coating, LLC | 100 | 100 | |
| Niagara Cutter LLC | 100 | 100 | |
| Seco Tools, LLC | 100 | 100 | |
| Sandvik Wire and Heating Technology Corporation | 100 | 100 | |
| Sandvik Thermal Process Inc. | 100 | 100 | |
| Sandvik Mining and Construction USA LLC | 100 | 100 | |
| Custom Electric Manufacturing LLC | 100 | 100 | |
| Melin Tool Company, Inc. | 100 | 100 | |
| Artisan Vehicle, Inc. | 100 | 100 | |
| CGTech | – | 100 | |
| Vietnam | Sandvik Vietnam Company Ltd | 100 | 100 |
| Seco Tools Vietnam Co Ltd | 100 | 100 | |
| Zambia | Sandvik Mining & Construction Zambia Limited | 100 | 100 |
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 a 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 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.
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.
| 2019 | 2020 | |
|---|---|---|
| Non-current receivables | ||
| Derivatives | 19 | – |
| Other interest-bearing receivables | 16 | 12 |
| Total | 35 | 12 |
| Other current receivables | ||
| Derivatives | 26 | – |
| Other non-interest-bearing receivables | 418 | 415 |
| Other interest-bearing receivables | 7 | 0 |
| Total | 451 | 415 |
| 2019 | 2020 | |
|---|---|---|
| Raw materials and consumables | 1,095 | 459 |
| Work in progress | 1,301 | 170 |
| Finished goods and goods for resale | 833 | 47 |
| Total | 3,229 | 676 |
According to the Articles of Association of Sandvik AB, the share capital shall amount to a minimum of SEK 700,000,000 and a maximum of SEK 2,800,000,000. 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:
| Quotient value | Share capital | ||
|---|---|---|---|
| Share capital at: | No. of shares | SEK/share | SEK |
| December 31, 2018 | 1,254,385,923 | 1.20 | 1,505,263,108 |
| December 31, 2019 | 1,254,385,923 | 1.20 | 1,505,263,108 |
| December 31, 2020 | 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 dividend for 2020 is estimated to amount to SEK 8,153 million, SEK 6.50 per share, the 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).
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 2020, 1,254,385,923 shares (1,254,385,923) with a quotient value of SEK 1.20 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.
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 includes amounts that before January 1, 2006 were included in the share premium 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.
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.
The Parent Company's recognized pension provision was SEK 303 million (337). 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 deficit was recognized as a liability in the companies. The Parent Company's funded obligations mainly comprise ITP Plans.
| Net amount recognized for pension obligations | -337 | -303 |
|---|---|---|
| Deficit in the assets of the pension foundation | -330 | 699 |
| Plan assets | 2,482 | 1,594 |
| obligations | 2,489 | 2,595 |
| Present value of funded and unfunded pension | ||
| 2019 | 2020 |
| Warranties Restructuring | Employee benefits |
Environmental obligations |
Legal disputes |
Other obligations |
Total | ||
|---|---|---|---|---|---|---|---|
| Balance at January 1, 2019 | 9 | 36 | 143 | 27 | – | 0 | 215 |
| Provisions made during the year | 1 | 265 | 56 | 25 | 0 | 0 | 347 |
| Provisions used during the year | 2 | -75 | -52 | 0 | 0 | 0 | -125 |
| Unutilized provisions reversed during the year | 0 | -4 | 0 | 0 | 0 | 0 | -4 |
| Balance at December 31, 2019 | 12 | 222 | 147 | 52 | 0 | 0 | 433 |
| Balance at January 1, 2020 | 12 | 222 | 147 | 52 | 0 | 0 | 433 |
| Provisions made during the year | -7 | 241 | 87 | -34 | – | 3 | 290 |
| Provisions used during the year | -2 | -168 | -102 | -1 | – | – | -273 |
| Unutilized provisions reversed during the year | – | -3 | – | – | – | 0 | -3 |
| Reclassifications | 0 | 3 | -3 | – | – | 0 | 0 |
| Balance at December 31, 2020 | 3 | 295 | 129 | 17 | 0 | 3 | 447 |
Non-current interest-bearing liabilities fall due as follows:
| 2019 | 2020 | ||||||
|---|---|---|---|---|---|---|---|
| Within one to five | Later than five | Within one to five | Later than five | ||||
| years | years | Total | years | years | Total | ||
| Loans from group companies | 1 | – | 1 | 1 | – | 1 | |
| Other liabilities 1) | 6 977 | 8 146 | 15 123 | 4,976 | 6,369 | 11,345 | |
| Total | 6 978 | 8 146 | 15 124 | 4,977 | 6,369 | 11,346 |
1) Other liabilities mainly comprise bond loans.
| 2019 | 2020 | |
|---|---|---|
| Personnel related | 1,767 | 995 |
| Expense related to finance | 304 | 122 |
| Other | 297 | 266 |
| Total | 2,368 | 1,383 |
| Contingent liabilities | 2019 | 2020 |
|---|---|---|
| Bills discounted | – | – |
| Other surety undertakings and contingent liabilities | 4,577 | 3,889 |
| Total | 4,577 | 3,889 |
| - of which for subsidiaries | 4,570 | 3,853 |
The Parent Company's surety undertakings and contingent liabilities amounted to SEK 3,889 million (4,577), of which SEK 1 million (1) 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 on advances received and various types of performance bonds and guarantees to financial institutions relating to local borrowings, and guarantee facilities as well as to pension commitments.
No assets of the Parent Company had been pledged in 2020 and 2019.
Sales to group companies from the Parent Company amounted to SEK 8,513 million (16,966), or 89 percent (81) of total sales. The share of exports was 67 percent (58). The Parent Company's purchases from group companies amounted to SEK 1,886 million (1,875), or 23 percent (11) 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.
There are no employment agreements between the companies in the Group and the Parent Company's directors or employees who provide compensation if those persons give notice of termination, or their services are terminated on a reasonable basis, or the employment is terminated as a consequence of a public takeover bid.
| Cash and cash equivalents | 2019 | 2020 |
|---|---|---|
| Cash and cash equivalents comprise: | ||
| Cash and bank | 0 | 0 |
| Total in the balance sheet | 0 | 0 |
| Total in the cash flow statement | 0 | 0 |
| Interest and dividend paid and received | 2019 | 2020 |
| Dividend received | 10,036 | 738 |
| Interest received | 489 | 396 |
| Interest paid | -572 | -481 |
| Total | 9,953 | 654 |
| Other adjustments for non-cash items, etc | 2019 | 2020 |
| Changes in value if financial instruments | 180 | -102 |
| Unappropriated results of associated companies | – | – |
| Gains and losses on disposal of non-current assets | -327 | -330 |
| Gains on disposal of companies and shares | -18 | 2,243 |
| Provision for pensions | -36 | -34 |
| Other provisions | 214 | 15 |
| Other | -235 | -2,205 |
| Total | -222 | -413 |
No major events to report after the end of the reporting period.
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 Directors' Report.
The Company's financial position at December 31, 2020 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 an unutilized revolving credit facility amounting to SEK 9,000 million, 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, March 1, 2021
Sandvik Aktiebolag (publ) BOARD OF DIRECTORS
The Board of Directors proposes that the profits at the disposal of the Annual General Meeting:
| profits carried forward | 31,747,920,923 |
|---|---|
| and result for the year | 2,867,375,636 |
| SEK | 34,615,296,559 |
| be appropriated as follows: | |
| a dividend of 6.50 SEK per share | |
to the shareholders 8,153,508,500 profits carried forward 26,461,788,059 SEK 34,615,296,559
The proposed record date for dividends is Thursday, April 29, 2021.
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 Tuesday, April 27, 2021.
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 July 19, 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, March 1, 2021
Johan Molin Jennifer Allerton Claes Boustedt
Chairman Board member Board member
Marika Fredriksson Johan Karlström Tomas Kärnström
Board member Board member Board member
Thomas Lilja Helena Stjernholm Kai Wärn Board member Board member Board member
Stefan Widing Board member President and CEO
Our auditor's report was submitted on March 5, 2021 PricewaterhouseCoopers AB
Peter Nyllinge Authorized Public Accountant Partner in charge
Magnus Svensson Henryson Authorized Public Accountant
Unofficial translation
To the general meeting of the shareholders of Sandvik AB (publ), corporate identity number 556000-3468
We have audited the annual accounts and consolidated accounts of Sandvik AB (publ) for the year 2020. The annual accounts and consolidated accounts of the company are included on pages 36–124 in this document.
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 Parent Company and the Group as of December 31, 2020 and its financial performance and cash flow 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 December 31, 2020 and their financial performance and cash flow for the year then ended in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU, and the Annual Accounts Act.
A corporate governance statement has been prepared and is in agreement with the Annual Accounts Act. 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 general meeting of shareholders adopts the income statement and balance sheet for the Parent Company and the Group.
Our opinions in this report on the annual accounts and consolidated accounts are consistent with the content of the additional report that has been submitted to the Parent Company's audit committee in accordance with the Audit Regulation (537/2014) Article 11.
We conducted our audit in accordance with International Standards on Auditing (ISA) and generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor's Responsibilities section. We are independent of the Parent Company and the Group in accordance with professional ethics for accountants in Sweden and have otherwise fulfilled our ethical responsibilities in accordance with these requirements. This includes that, based on the best of our knowledge and belief, no prohibited services referred to in the Audit Regulation (537/2014) Article 5.1 have been provided to the audited company or, where applicable, its Parent Company or its controlled companies within the EU.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions.
We designed our audit by determining materiality and assessing the risks of material misstatement in the consolidated financial statements. In particular,we considered where management made subjective judgments; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which the Group operates.
Sandvik performs its business via its subsidiaries in many territories. Operationally, the business is organized in divisions that are aligned with the Group's three Business Areas. There are joint functions at various levels of the Group to support the operational activities of the divisions.
In order to tailor our overall audit approach, we have updated our understanding of how the Group's business is organized, about important systems and processes as well as the internal controls put in place to provide comfort to management and the directors with respect to precision of the financial reporting. For this purpose, we have held interviews with management at various levels of the Group and heads of Group functions to discuss the business and the Group's strategy. We have also obtained and read management reports, policies, instructions and planning and steering documents. In addition, we have had a close dialogue with both Group Internal Audit and Group Internal Controls in order to share knowledge and coordinate activities when relevant.
With all of this as a starting point and for the purpose of expressing an opinion on the consolidated accounts, we decided that approximately 80 reporting units were the most important and should be in scope for the Group audit. Financial reporting from less significant units were covered through analytical procedures that were used to conclude whether extended audit procedures were necessary. Most subsidiaries of the Group are also subject to statutory audit requirements. The central team was responsible for the audit of significant IT systems, processes, transaction flows and functions including the consolidation and the parent company accounts. The local teams were responsible for auditing items related to the operations in each reporting unit that emanates from local production and sales activities.
We have considered the impact Covid-19 has had on our audit and tailored our procedures to properly cover any new and/or increased risks. On an overall level we have been able to conduct our audit although the pandemic has led to other ways of working and use of digital tools for communication and collection of audit evidence.
The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated financial statements.
Based on our professional judgment, we determined certain quantitative thresholds for materiality, including the overall group materiality for the consolidated financial statements as a whole. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate on the financial on the financial statements as a whole.
Key audit matters of the audit are those matters that, in our professional judgment, were of most significance in our audit of the annual accounts and consolidated accounts of the current period. These matters were addressed in the context of our audit of, and in forming our opinion thereon, the annual accounts and consolidated accounts as a whole, but we do not provide a separate opinion on these matters.
The Group manufactures and sells products and services to its customers globally, mainly through its own distribution network. Sales contracts contain various performance obligations and other terms and the determination of when significant performance obligations have been met varies albeit a specific point in time can often be established. The Group has analyzed its various sales contracts and concluded on the principles for deciding in which period or periods the Group's sales transactions should be recognized as revenue.
Disclosures in notes G2, G3 and P2 provide additional information on how the Group accounts for its revenue.
The majority of Sandvik's intangible assets have been acquired externally, mostly through acquiring businesses and represent significant amounts. Assets with indefinite useful life such as goodwill are not subject to yearly depreciation. Instead, an annual test will show whether the carrying amount for the cash generating unit can still be supported. Sandvik has acquired and divested several businesses containing intangible assets during 2020. There are a number of instances where management's judgment is decisive for the accounting treatment in connection with acquiring and divesting of businesses. Management's estimates of the intangible assets' potential to generate future cash flows and other assumptions are also decisive when preparing the annual impairment tests.
Note G13 contains additional information on the Group's intangible assets and the significant assumptions applied in the annual impairment tests.
Sandvik keep significant stock of raw materials, spare parts and work-in-progress at its production units and stores of finished goods mostly at its sales units and distribution centres. Measurement of inventory is important for a fair presentation of gross margin. A due process is required to prepare accurate reporting of the acquisition cost when procurement, production and logistical processes are complex. Establishing product costing requires many instances of management judgment with effect on the reported values. This includes considering normal production levels, foreign currency, prices of raw materials and allocation of other direct and indirect costs. For finished goods, assessment is needed of obsolescence and how sellable the products are. Finally, there is a complexity in monitoring and measuring volumes particularly for some raw materials and work in progress as well as eliminating effects from intra group transactions.
Notes G18 and P14 provide information about the the Group's accounting principles for measuring inventory and additional information on the line item.
Our audit included but was not limited to the following activities: – Mapped and evaluated selected systems and processes for
Our audit included but was not limited to the following activities:
Sandvik has announced a number of measures to mitigate effects from the Covid-19-pandemic during 2020 with actions supporting short-term and long-term savings. Efficiency measures to mitigate a slower demand environment and to ensure optimized efficiency cover initiatives across all business areas. As of December 31, 2020, the Group has recorded a provision for restructuring amounting to SEK 2.6 bn. Both the costs for executing the efficiency measures and the expected reduction of cost for running the business going forward are significant. An accurate reporting of an efficiency program involves management estimates on the timing and measurement of costs for reducing staff, exiting agreements and the other costs that the efficiency measures give rise to as well as the presentation of the effects on the business going forward.
Note G24 provide information on the Group's accounting principles for measuring restructuring costs and additional information on the line item.
This document also contains other information than the annual accounts and consolidated accounts and is found on pages 1–36 and 129–144, and the Statutory Sustainability Report and Sustainable Business Report on pages 2–3, 9–11, 54–60 and 129–140. This other information also contains the Remuneration report that we expect to receive after the release of the Auditors' report. The Board of Directors and the Managing Director are responsible for this other information.
Our opinion on the annual accounts and consolidated accounts does not cover this other information and we do not express any form of assurance conclusion regarding this other information.
In connection with our audit of the annual accounts and consolidated accounts, our responsibility is to read the information identified above and consider whether the information is materially inconsistent with the annual accounts and consolidated accounts.
In this procedure we also take into account our knowledge otherwise obtained in the audit and assess whether the information otherwise appears to be materially misstated. If we, based on the work performed concerning this information, conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
The Board of Directors and the Managing Director are responsible for the preparation of the annual accounts and consolidated accounts and that they give a fair presentation in accordance with the Annual Accounts Act and, concerning the consolidated accounts, in accordance with IFRS as adopted by the EU. The Board of Directors and the Managing Director are also responsible for such internal control as they 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 audit included but was not limited to the following activities:
In preparing the annual accounts and consolidated accounts, The Board of Directors and the Managing Director are responsible for the assessment of the company's and the group's ability to continue as a going concern. They disclose, as applicable, matters related to going concern and using the going concern basis of accounting. The going concern basis of accounting is however not applied if the Board of Directors and the Managing Director intend to liquidate the company, to cease operations, or has no realistic alternative but to do so.
The Audit Committee shall, without prejudice to the Board of Director's responsibilities and tasks in general, among other things oversee the company's financial reporting process.
Our objectives are to obtain reasonable assurance about whether the annual accounts and consolidated accounts as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinions. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and generally accepted auditing standards in Sweden will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these annual accounts and consolidated accounts.
A further description of our responsibility for the audit of the annual accounts and consolidated accounts is available on Revisorsinspektionen's website: www.revisorsinspektionen.se/revisornsansvar. This description is part of the auditor´s report.
In addition to our audit of the annual accounts and consolidated accounts, we have also audited the administration of the Board of Director's and the Managing Director of Sandvik AB (publ) for the year 2020 and the proposed appropriations of the company's profit or loss.
We recommend to the general 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 Director's and the Managing Director be discharged from liability for the financial year.
We conducted the audit in accordance with generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor's Responsibilities section. We are independent of the Parent Company and the Group in accordance with professional ethics for accountants in Sweden and have otherwise fulfilled our ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions.
The Board of Directors is responsible for the proposal for appropriations of the company's profit or loss. At the proposal of a dividend, this includes an assessment of whether the dividend is justifiable considering the requirements which the company's and the Group's type of operations, size and risks place on the size of the parent company's and the Group' equity, consolidation requirements, liquidity and position in general.
The Board of Directors is responsible for the company's organization and the administration of the company's affairs. This includes among other things continuous assessment of the company's and the Group's financial situation and ensuring that the company´s organization is designed so that the accounting, management of assets and the company's financial affairs otherwise are controlled in a reassuring manner. The Managing Director shall manage the ongoing administration according to the Board of Directors' guidelines and instructions and among other matters take measures that are necessary to fulfill the company's accounting in accordance with law and handle the management of assets in a reassuring manner.
Our objective concerning the audit of the administration, and thereby our opinion about discharge from liability, is to obtain audit evidence to assess with a reasonable degree of assurance whether any member of the Board of Directors or the Managing Director in any material respect:
Our objective concerning the audit of the proposed appropriations of the company's profit or loss, and thereby our opinion about this, is to assess with reasonable degree of assurance whether the proposal is in accordance with the Companies Act.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with generally accepted auditing standards in Sweden will always detect actions or omissions that can give rise to liability to the company, or that the proposed appropriations of the company's profit or loss are not in accordance with the Companies Act.
A further description of our responsibility for the audit of the administration is available on Revisorsinspektionen's website: www.revisorsinspektionen.se/revisornsansvar. This description is part of the auditor's report.
PricewaterhouseCoopers AB, Torsgatan 21, 113 97 Stockholm, was appointed auditor of Sandvik AB (publ) by the general meeting of the shareholders on April 28, 2020 and has been the company's auditor since the general meeting of the shareholders on April 27, 2018.
Stockholm, March 5, 2021
PricewaterhouseCoopers AB
Peter Nyllinge Authorized Public Accountant Lead Partner
Magnus Svensson Henryson Authorized Public Accountant
| NF1 | About this report | 130 |
|---|---|---|
| NF2 | Stakeholder dialogues | 130 |
| NF3 | Materiality analysis | 130 |
| NF4 | Code of Conduct | 130 |
| NF5 | Speak up | 130 |
| NF6 | Compliance | 131 |
| NF7 | Employees | 131 |
| NF8 | Health and Safety | 133 |
| NF9 | Environmental footprint | 134 |
| NF10 | Sustainable supplier management | 137 |
| NF11 | Community involvement | 138 |
| NF12 | GRI index | 139 |
This is the fifteenth consecutive year of sustainable business reporting for Sandvik. We aim to continue reporting the same way on an annual basis. The data in this report refers to the 2020 fiscal year. Sandvik's most recent Sustainable Business Report was published in March 2020. In the non-financial notes, information on strategy, management approach, stakeholder dialogues, materiality analysis and sustainability data are presented.
Information meeting the Swedish legal requirements on sustainability reporting, the Statutory Sustainability report, and Sandvik's Sustainable Business Report, are found on pages 2–3, 9–11, 56–60 and 130–140. See note P12 for a list of entities included in the figures, unless otherwise stated.
This report has been prepared in accordance with the Global Reporting Initiative, GRI Standards, Core option. The figures presented are the accumulated figures for 2020 for all active reporting units, unless otherwise stated. An operational control approach was used for consolidations. It covers our material aspects decided in the materiality analysis described in NF3 and it has been reviewed by an external party. As of 2020, we no longer report on emissions to water.
The assurance provider was engaged by the Board of Directors and the CEO of Sandvik to undertake a limited assurance engagement of Sandvik's Sustainability Report for the year 2020. The assurance provider is independent to Sandvik.
Sandvik is a signatory to the UN Global Compact (UNGC) and reports on the ten principles in accordance with the UNGC Advanced level criteria.
We have defined a number of stakeholders who can be expected to be affected by Sandvik or have an affect on Sandvik, of which the most significant are customers, employees and investors.
We engage in an open dialogue with our stakeholders. Some of the dialogues held in 2020 include: Group or individual meetings with analysts, investors and shareholders discussing issues like strategy implementation, the relevance of the 2030 Goals to Sandvik's business, targets and target outcome and contribution to the UN Sustainable Development Goals. Customer dialogues are held continuously, including on issues such as product development for improved safety and energy efficiency of the products. In 2020, much of the dialogue was moved to digital channels, such as the virtual event "Innovation in Mining". Investors and customers show a markedly increased interest in sustainability-related issues. We have an ongoing dialogue with suppliers relating to the Supplier Code of Conduct. There are continuous dialogues with employees through meetings, employee surveys and performance dialogues and we have included sustainability-related questions in the Sandvik all-employee survey. Sandvik regularly meets with unions and discusses the sustainability agenda. In 2020, we entered a partnership with the Lahti University of Applied Sciences in Finland to share insights on industrial production and sustainability. In September, students from the university carried out a sustainability review at the Lahti site.
Sandvik is a member of the UN Global Compact. Sandvik is also part of the industry association Jernkontoret (steel producers), Svemin (mines, minerals and metal producers), the Cobolt Institute and the International Tungsten Industry Association.
Sandvik has a materiality analysis based on the process and method for its long-term sustainability target setting. The starting point is the sustainability agenda for the Group, derived from international frameworks and institutions such as the UN SDGs, the UN Global Compact, media reports, global trends, stakeholder dialogues and our own assessments.
In 2018, an initiative started to develop a set of long-term sustainability goals. The objective was to develop goals covering the most material areas for the Group and for its stakeholders. The target-setting had a holistic approach, including customers, own operations and suppliers to the scope.
The target process involved the Group Executive Management, business areas, divisions, functional groups and selected experts, and was based on input from stakeholders such as employees, customers, shareholders and investors. The conclusion was to focus our sustainability agenda around the four areas of circularity, climate, people and fair play.
The Sustainability Goals 2030 were approved by the Group Executive Management and the Board of Directors in 2019. The 2020 review of the long-term sustainability goals did not indicate a need to add or exclude any target area.
Sandvik's Code of Conduct is based on our Core Values and confirms our strong commitment to ethical and responsible business practices and compliance with relevant laws and regulations in all markets where we operate. The Code of Conduct describes the principles of behavior that our employees should adhere to and provides guidance in our actions and everyday business decisions.
Sandvik has set a target to train 100 percent of employees and long-term contractors hired for more than 90 days in the Code of Conduct. The training contains sections dedicated to anti-bribery, corruption, diversity and inclusion and more. Every quarter, a training report is generated to monitor this target. By the end of 2020, 98 percent (96) of employees and long-term contractors had completed the Code of Conduct training. All members of the Board of Directors as well as the Group Executive Management have undergone training in the Code. A target has also been set for onboarding of new employees, whereby 90 percent of new employees should be trained within three months from being hired. The outcome by the end of 2020 was 76 (65) percent.
Employees and external parties who witness a violation of the Code of Conduct, laws or our policies can report the violation, anonymously if requested, through the global reporting tool Speak Up. They can also ask questions related to the Code of Conduct through Speak Up.
In 2020, we launched a global Speak Up training, consisting of four lessons, with the purpose of informing the employees about the whistleblowing process. The first and last lesson included a survey about employee awareness of and trust in Speak Up. According to the surveys, the training showed very good results with substantial improvements in both awareness and trust across the organization. This was confirmed in the 2020 Employee Engagement Survey, where 92 percent (83 in 2018) of respondents said they were aware of Speak Up and 78 percent (74 in 2018) said they trust that they can report without fear of retaliation.
Speak Up is available through Sandvik internet and intranet portals, as well as through telephone hotlines 24 hours a day, 7 days a week, in all major countries where Sandvik operates. Speak Up reports are screened and each case is then assigned an investigator that conducts the investigation, supported by a specialist investigation function.
In 2020, 203 (142) Speak Up incidents were reported (see distribution in chart). Of all cases opened and closed in 2020, 63 percent were closed within 90 days and the substantiation rate of closed cases amounted to 45 (38) percent. 2 percent (4) of all Speak Up reports related to human rights matters. In 2020, we added division data to the reports in order to provide the business areas with more detailed statistics.
| Number | % | |||
|---|---|---|---|---|
| Speak Up Reports | 2019 | 2020 | 2019 | 2020 |
| Human Relations | 47 | 69 | 33 | 34 |
| Compliance | 26 | 43 | 18 | 21 |
| Theft and misappropriation | 13 | 10 | 9 | 5 |
| Business records and information |
6 | 12 | 4 | 6 |
| EHS | 12 | 20 | 8 | 10 |
| Inquiries | 21 | 17 | 15 | 8 |
| Other | 17 | 32 | 12 | 16 |
| Total | 142 | 203 | 100 | 100 |
Sandvik manages compliance risks through a compliance program with a collective oversight through a Group function in four areas: anti-bribery and corruption, competition law, trade compliance and data privacy. In 2020, the strategic work mainly focused on the rollout of a compliance tool, the Compliance House. The Compliance House is a tool which enables all levels of the company, from each individual business unit to the Board of Directors, to get an overview of the requirements in the four compliance programs that are relevant to them, the respective risk levels and the current status of their compliance activities. The purpose of the Compliance House is to further embed compliance into the business and allow entity level monitoring of risks and compliance status. Our 2020 target to implement the Compliance House at 25–50 percent of Sandvik entities was met.
Compliance training was offered to employees in different formats, including e-learning, webinars and classroom training. A total of 8,538 (3,800) participants received training.
There were extensive activities in the trade compliance program area in 2020 due to continued Brexit preparations, trade wars and a number of changes in customs tariffs and international sanctions imposed by the US government and other countries. For data privacy, anchoring of data privacy networks and formal processes as well as publication of formal governance documents, expanded awareness training, and work to begin scaling and leveraging the European GDPR program for a more global reach, were begun and underway.
Sandvik has zero tolerance for bribery and corruption. In 2020, the implementation of processes and systems to handle risks related to administrative intermediaries, such as customs agents, was in focus.
We have a competition law compliance program in place to mitigate risks associated with competition or antitrust laws in all countries where Sandvik operates. The program relies on frequent e-learning and in-person training for employees who may be exposed to competition law risks in their work. In 2020, 3,583 (1,500) employees received training in competition law. Training in this area is repeated and updated every second year. Comprehensive competition law guidelines are available for all employees who are also encouraged to seek advice from Sandvik Legal Support teams in case of doubts about the legality of a business activity.
Sandvik received no significant fines or non-monetary sanctions for non-compliance with laws or regulations related to our four areas.
At year-end 2020 the number of employees amounted to 37,125 (40,235).
Sandvik provides employee development opportunities through on-the-job-training, virtual learning channels and classroom training. In 2020, we signed a contract with Linkedin Learning and can now offer a wide range of digital skills training in various topics and languages, available on any device. We offer our employees leadership programs, learning academies, digital workshops, mentoring, and other opportunities to acquire new skills and knowledge. Due
to the pandemic situation, most leadership and expert programs were postponed and only 36 (549) employees participated in a program. In the fourth quarter, a digital leadership program, Leading Remote, was launched and 30 employees participated during the quarter.
The Global Graduate Program is Sandvik's global trainee program that offers young professionals the opportunity to explore various parts of our operations during 18 months. In 2019, the fourth program started. To secure a truly global team that mirrors our business presence, our ten graduates come from different geographies: China, India, Finland, Sweden and the US.
As a Sandvik employee you are responsible for your own career development. Sandvik offers a wide range of career opportunities. Our internal job market enables our employees to move to other parts of Sandvik or other countries and to grow and develop as individuals and professionals. In 2020, about 1,790 (2,700) employees were hired and a vast majority of the positions were posted on the open internal job market.
The share of women in managerial positions increased to 18.5 percent (18.2), the share of women in division management teams amounted to 20 percent (19) and the share of women in our talent pool was 33 percent (25). 19 percent (19) of the members in division management teams were non-Europeans. Our sustainability goals include a one third share of female managers by 2030.
We offer training in diversity and inclusion by offering a leadership workshop and a toolbox that includes e-learning workshops and exercises. We rolled out an online diversity and inclusion training globally in which 19,682 employees participated with a high engagement level. Our Bridge program focuses on leading across boundaries and all our internal global leadership programs include training on how managers can work with diversity and inclusion.
We conduct a global Sandvik employee engagement survey biannually. In the 2020 survey, the Sandvik Employee Engagement Index showed a score of 80 percent (76 in 2018) with a participation rate of 83 percent (87 in 2018). The survey provides a starting point for team performance dialogues and development activities, and measures both how engaged our employees are and whether we, as a company, have put in place all we need to achieve high organizational results.
Every employee at Sandvik is offered at least one individual performance dialogue annually with their manager, that focuses on previous performance, new goals, as well as development plans for the coming years. In 2020, 95 percent (97) of employees participated in performance dialogues.
In 2020, 58 percent (61) of employees were covered by collective bargaining agreements.
Share of women in managerial positions, %
| Female | Male | Total | ||||
|---|---|---|---|---|---|---|
| FTE | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 |
| Permanent | 7,502 | 7,308 | 31,130 | 30,434 | 38,632 | 37,742 |
| Temporary | 461 | 439 | 1,423 | 1,291 | 1,885 | 1,730 |
| Total | 7,963 | 7,747 | 32,553 | 31,725 | 40,516 | 39,472 |
| Female | Male | Total | ||||
|---|---|---|---|---|---|---|
| FTE | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 |
| Full time | 7,217 | 7,071 | 31,982 | 31,195 | 39,199 | 38,266 |
| Part time | 743 | 671 | 574 | 535 | 1,317 | 1,206 |
| Total | 7,960 | 7,742 | 32,556 | 31,730 | 40,516 | 39,472 |
| Permanent | Temporary | Total | ||||
|---|---|---|---|---|---|---|
| FTE | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 |
| Europe | 23,340 | 22,530 | 710 | 634 | 24,050 | 23,164 |
| North America |
4,545 | 4,449 | 26 | 13 | 4,571 | 4,462 |
| South America |
1,745 | 1,747 | 29 | 19 | 1,774 | 1,766 |
| Africa & Middle East |
1,922 | 1,883 | 214 | 245 | 2,136 | 2,128 |
| Asia | 6,200 | 6,216 | 891 | 804 | 7,091 | 7,020 |
| Australia | 928 | 942 | 20 | 19 | 948 | 961 |
| Total | 38,680 | 37,767 | 1,890 | 1,734 | 40,570 | 39,501 |
Total number and rates of new employee hires and employee turnover by age group, gender, and area1)
| 2019 | 2020 | |||
|---|---|---|---|---|
| Hired | % | Hired | % | |
| Under 30 | 859 | 35 | 475 | 31 |
| 30–50 | 1,379 | 57 | 972 | 62 |
| Over 50 | 187 | 8 | 114 | 7 |
| Total | 2,425 | 100 | 1,561 | 100 |
| % | |||
|---|---|---|---|
| 23 | |||
| 77 | |||
| 2,727 | 100 | 1,790 | 100 |
| Hired 607 2,120 |
2019 % 22 78 |
2020 Hired 406 1,384 |
| 2019 | 2020 | |||
|---|---|---|---|---|
| Hired | % | Hired | % | |
| Europe | 1,249 | 46 | 742 | 41 |
| North America | 627 | 23 | 302 | 17 |
| South America | 222 | 8 | 173 | 10 |
| Africa & Middle East | 113 | 4 | 81 | 4 |
| Asia | 355 | 13 | 387 | 22 |
| Australia | 161 | 6 | 105 | 6 |
| Total | 2,727 | 100 | 1,790 | 100 |
| 2019 | 2020 | |||
|---|---|---|---|---|
| Left | % | Left | % | |
| Under 30 | 501 | 9 | 502 | 11 |
| 30–50 | 1,990 | 8 | 1,458 | 6 |
| Over 50 | 1,492 | 14 | 1,100 | 10 |
| Total | 3,983 | 10 | 3,060 | 8 |
| 2019 | 2020 | |||
|---|---|---|---|---|
| Left | % | Left | % | |
| Female | 832 | 10 | 646 | 8 |
| Male | 3,151 | 10 | 2,361 | 7 |
| Total | 3,983 | 10 | 3,007 | 8 |
| 2019 | 2020 | |||
|---|---|---|---|---|
| Left | % | Left | % | |
| Europe | 1,993 | 8 | 1,587 | 7 |
| North America | 861 | 19 | 683 | 15 |
| South America | 280 | 15 | 179 | 10 |
| Africa & Middle East | 233 | 11 | 120 | 6 |
| Asia | 528 | 7 | 385 | 6 |
| Australia | 151 16 |
106 | 11 | |
| Total | 4,046 | 10 | 3,060 | 8 |
| Female | Male | Total | ||||
|---|---|---|---|---|---|---|
| 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | |
| Staff | 26 | 26 | 74 | 74 | 54 | 53 |
| Workers | 13 | 12 | 87 | 88 | 46 | 47 |
| Total | 20 | 20 | 80 | 80 | 100 | 100 |
| Under 30 | 30–50 | Over 50 | Total | |||||
|---|---|---|---|---|---|---|---|---|
| 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | |
| Staff | 9 | 8 | 64 | 64 | 27 | 28 | 54 | 53 |
| Workers | 16 | 15 | 56 | 57 | 28 | 28 | 46 | 47 |
| Total | 12 | 11 | 60 | 61 | 27 | 28 | 100 | 100 |
| Age structure, % | |||||
|---|---|---|---|---|---|
| Share of women, % | Under 30 | 30–50 | Above 50 | ||
| Board of Directors | 27 | – | 27 | 73 | |
| Group Executive Management | 33 | – | 33 | 67 | |
| Management | 18,5 | 1 | 68 | 31 | |
| Other employees | 19,6 | 12 | 60 | 28 |
1) Differences in the total number of employees due to insufficient data.
Employee statistics regarding the number of FTEs (Full Time Equivalents) is derived from the financial reporting system. We have revised our figures for the total number of employees (FTE) for the years 2014–2017 as we now report on continuing operations to be more aligned with financial reporting. All other employee statistics (age, turnover, new employees, part time/full time, gender, performance dialogues) are derived from the Group's common HR system, which covers 98 percent of Sandvik employees. These figures are compiled annually. We define manager as an employee managing an organization. Sandvik does not have a significant portion of workers who are not employees.
Every non-administrative Sandvik location with more than 25 people is required to have external certification within two years of commencement or acquisition. At the end of 2020, 98 percent of sites in scope were certified. No previous certifications were abandoned compared to last year.
We utilize a wide range of leading and lagging indicators to measure health and safety performance in every Sandvik location, including Lost Time Injury Frequency Rate (LTIFR) and Total Recordable Injury Frequency Rate (TRIFR). Both of these indicators show long-term positive trends. In 2020, the LTIFR (LTIs per million hours worked) decreased to 1.4 (1.5), and the TRIFR (total number of recordable injuries per million hours worked) was reduced to 3.2 (3.8). Cuts and pinched hands and fingers were the most common injury types. As the LTIFR gets to lower levels, Sandvik is moving towards a greater focus on TRIFR as its primary safety performance indicator. Regrettably, a tragic incident occurred during the year at one of our Swedish production units, causing two fatalities. The incident investigation is still on-going. This was the first fatality since 2015.
Sandvik has processes in place to record and investigate occupational illnesses to determine the root causes and develop prevention strategies. Repetitive strain injuries and stress-related symptoms were the most commonly reported illnesses.
We continually work to replace hazardous materials with less hazardous alternatives in our production or, where replacement is not an option, minimize the use of hazardous materials. We invest in new equipment and improve our processes to reduce employee exposure to hazards such as noise, dust and exposure to gases or other substances. Our products and solutions are designed with improved customer health and safety in focus, for example by reducing their exposure to chemical hazards. Our battery-driven underground mining equipment helps to alleviate the potential health impacts of diesel particulate matter and other engine emissions.
| Health and safety | 2019 | |||||
|---|---|---|---|---|---|---|
| Injury | Employees | Non-employees1) | Total Workforce | Employees | 2020 Non-employees1) |
Total Workforce |
| Number of fatalities | – | – | – | 2 | – | 2 |
| Number of LTI | 124 | 9 | 133 | 95 | 6 | 101 |
| LTIFR2) | 1.6 | 0.92 | 1.5 | 1.5 | 0.75 | 1.4 |
| Number of TRI | 296 | 33 | 329 | 215 | 17 | 232 |
| TRIFR2) | 3.9 | 3.4 | 3.8 | 3.3 | 2.1 | 3.2 |
| Exposure hours, hazards and near misses |
||||||
| Million exposure hours | 76.1 | 9.8 | 85.9 | 65.5 | 8.0 | 73.5 |
| Hazards reported | 81,158 | 56,008 | ||||
| Hazards closed out | 79,192 | 53,145 | ||||
| Hazard close out ratio (%) | 97.6 | 94.9 | ||||
| Near misses reported | 6,323 | 4,144 | ||||
| Work-related illness3) | ||||||
| Illness | ||||||
| Number of fatalities | 0 | 0 | 0 | 0 | 0 | 0 |
| Number of LTIL | 10 | 2 | 12 | 5 | 1 | 6 |
| LTILFR2) | 0.13 | 0.20 | 0.14 | 0.08 | 0.12 | 0.08 |
| Number of TRIL | 17 | 3 | 20 | 18 | 2 | 20 |
| TRILFR2) | 0.24 | 0.31 | 0.23 | 0.27 | 0.25 | 0.27 |
1) All workers who are not employees but whose work and/or workplace is controlled by Sandvik.
2) Normalization factor = 1,000,000 hours worked.
3) Based on data from only a few entities.
NF8, continued
Health and Safety data is derived from our EHS reporting system in which safety-related indicators are reported on a monthly basis. The key figures compiled are based on information available at the date of the most recent year-end accounts, which may entail that historical figures have been adjusted.
An LTI is an accident resulting in time away from work, an RWI (Restricted Work Injury) is an injury where you can be at work but you can't perform your ordinary work, and a MTI (Medical Treatment Injury) is when you need some kind of medical treatment but can still perform your normal work. Worked hours is defined as exposure hours, i.e. all hours exposed to risk by employees, contractors and sub-contractors. The exposure hours are collected and entered into the EHS database on a monthly basis. The term used in GRI named as "high-consequence injury/illness" is incorporated in the key figures for Lost Time cases. In the past two years we have had one incident on record meeting the six months absence criteria. Our
Sandvik is working to ensure that every individual site in the company has an action plan to increase energy efficiency and reduce carbon dioxide emissions (CO2). Sandvik had 88 environmental action plans underway in 2020, consisting of more than 260 individual actions. Heat exchange systems, improved insulation in buildings, LED lighting, and solar rooftop panels are some examples of initiatives. As a consequence of the economic slowdown and focus on cost control, as well as reduced work hours, many of these projects suffered delays and many were put on hold. Therefore, the reported outcome of these initiatives were close to zero for the year, and our reported reductions of carbon emission and energy use was essentially all attributable to the lower activity levels during the year.
For 2020, Sandvik had set a target to reduce its energy usage and CO2 emissions, through environmental improvement actions, by 1.3 percent and 1.3 percent, respectively. The completed actions resulted in annual energy reductions of 0.2 percent and carbon emission reductions of 0.3 percent, during a year when many projects were either halted or severely delayed. Nevertheless, we managed to reduce total energy by nearly 13 percent and carbon emissions declined by more than 18 percent compared to the previous year. Since few projects were completed, it's deemed that most of the reductions were attributed to the lower activity levels caused by the Covid-19 pandemic and, to some lesser extent, from projects completed in previous years.
Our main production sites in Europe have been buying electricity from low emission energy sources since 2013, resulting in a reduction of annual emissions by approximately 112,000 tons based on the 2020 outcome.
§ approach to mitigate these high severity incidents and illnesses is a key part of our management system and is handled within the processes for serious potential incidents, for example in our work with critical control management.
The reported data for occupational illnesses and frequency rates are part of our monthly reporting process. The illness data is not seldom difficult to capture and can in some cases be surrounded by regulatory obligations, for example related to privacy of workers. Part of the difficulty lies in the fact that occupational illness might not be detected until some time after an exposure occurs, which may contribute to a risk that the illness is not recognized as work-related. As a consequence, the level of uncertainty is deemed higher for the illness data. Illness is defined as an occurrence of physical or mental harm or disease that develops over time in the course of work and not as the result of a single instantaneous event. Establishing an illness as work-related can be a complicated process and could span over a long period of time.
| Energy consumption (TJ) | 2019 | 2020 |
|---|---|---|
| Non-renewable fuels | 2,811 | 2,365 |
| Gasoline | 223 | 136 |
| Diesel | 355 | 293 |
| Liquefied petroleum gas | 698 | 474 |
| Natural gas | 1,442 | 1,417 |
| Fuel oil | 93 | 45 |
| Renewable fuels | 15 | 27 |
| Ethanol | 2 | 2 |
| HVO | 13 | 24 |
| Total energy from fuels | 2,825 | 2,392 |
| GRID electricity | 4,865 | 4,307 |
| Own renewable electricity | 8 | 10 |
| Purchased heat and steam | 294 | 267 |
| Sold heat | -35 | -38 |
| Total electricity heat and steam | 5,132 | 4,547 |
| Total energy consumption | 7,958 | 6,939 |
| Total energy use in relation to revenues | 2019 | 2020 |
|---|---|---|
| GJ/MSEK | 77 | 80 |
| Reduction of energy consumption | ||
| Total energy use 2019 | TJ 7,958 |
% |
| Environmental improvement actions | -17 | -0.2 |
| Other impacts | -1,002 | -12.6 |
Total energy use 2020 6,939 -12.8
Sandvik Materials Technology, 53% Sandvik Manufacturing and Machining Solutions, 34%
Sandvik Mining and Rock Technology, 12%
| GHG emissions (kton CO2) | 2019 | 2020 |
|---|---|---|
| Scope 1 | 177 | 146 |
| Scope 2 (location based) | 279 | 239 |
| Initiatives to source low-emission electricity | -120 | -112 |
| Scope 2 (market based) | 159 | 128 |
| Gross total (location based) | 455 | 385 |
| Net total (market based) | 335 | 274 |
The main difference between our reported market-based and location-based emissions derives from the purchase of emission-free electricity for our European operations. In 2020, Sandvik used 974 GWh grid electricity in Europe. We sourced, and cancelled, Guarantees of Origin for the full amount of electricity used in our European operations during the year.
Sandvik Manufacturing and Machining Solutions, 41% Sandvik Materials Technology, 39%
Sandvik Mining and Rock Technology, 17%
| Net total CO2 emissions in relation to revenues | 2019 | 2020 |
|---|---|---|
| ton/MSEK | 3.2 | 3.2 |
| kton | % | |
|---|---|---|
| CO2 emissions 2019 | 335 | |
| Environmental improvement actions | -1 | -0.3 |
| Other impacts | -61 | -18.1 |
| CO2 emissions 2020 | 274 | -18.4 |
| Other air emissions (ton) | 2019 | 2020 |
|---|---|---|
| NOx | 203 | 166 |
| SOx | 5 | 2 |
| Volatile organic compounds (NMVOC) | 46 | 29 |
Other air emissions were calculated based on reported use of fossil fuel. In addition to the values reported in the table above, the steel mill operations generate an estimated 145 tons of NOx and 31 tons of SOx per year.
About 90 percent of our manufacturing activities take place in areas where there is an abundance of water. Nonetheless, water use is closely monitored and many measures are taken to minimize consumption, including circulation of cooling water as a means to reduce the need for fresh water.
Sandvik's emissions to water consist mainly of nitrogen compounds, oxygen-consuming substances and metals. All wastewater from production processes is treated before being released, to ensure that all discharges are below the acceptable limit.
| 2019 | 2020 | |||
|---|---|---|---|---|
| Water | Water | |||
| Fresh water by source of | All | stressed | All | stressed |
| withdrawal | Areas | Areas | Areas | Areas |
| Surface | 4,332 | 0 | 4,014 | 0 |
| Ground | 1,048 | 87 | 1,090 | 103 |
| Third-party | 2,194 | 42 | 2,110 | 20 |
| Rain | 23 | 14 | 18 | 9 |
| Total withdrawal | 7,597 | 143 | 7,232 | 131 |
NF9, continued
| 2019 | 2020 | |||
|---|---|---|---|---|
| Water discharge by destination |
All Areas |
Water Stressed Areas |
All Areas |
Water Stressed Areas |
| Surface | 1,495 | 0 | 1,377 | 0 |
| Fresh water | 907 | 0 | 809 | 0 |
| Other water | 588 | 0 | 569 | 0 |
| Ground | 492 | 0 | 452 | 0 |
| Fresh water | 4 | 0 | 3 | 0 |
| Other water | 488 | 0 | 448 | 0 |
| Third-party | 5,610 | 143 | 5,403 | 131 |
| Fresh water | 5,415 | 143 | 5,224 | 131 |
| Other water | 195 | 0 | 179 | 0 |
| Total | 7,597 | 143 | 7,232 | 131 |
| Water withdrawal in relation to revenues | 2019 | 2020 |
|---|---|---|
| m3/MSEK | 74 | 84 |
| 1,000 m3 |
% | |
|---|---|---|
| Water 2019 | 7,597 | |
| Environmental improvement actions | 0 | 0 |
| Other impacts | -365 | -4.8 |
| Water 2020 | 7,232 | -4.8 |
Sandvik does not use water in its products. In manufacturing operations, especially in hot environments, some water will inevitably transpire and evaporate. The evaporated volumes are insignificant in relation to production and water volumes. There are no steps in our manufacturing processes that would cause irreversible pollution to the water being used. All water withdrawn is released back to recipients after relevant treatment, either in our own treatment facilities or in third-party treatment operations. For the main manufacturing operations, water withdrawal and discharges are conducted in a carefully controlled manner and subject to relevant permits. No significant water incidents were reported.
Circularity is a key aspect for Sandvik and we reuse and recycle to offset the use of raw materials and reduce waste. Total waste decreased by 2 percent. In 2020, 18 of Sandvik's production-related sites reported a 100 percent waste recovery rate. Sandvik recycles both steel and cemented carbide.
| Waste by type and disposal method (kton) | 2019 | 2020 |
|---|---|---|
| Hazardous waste | 34 | 33 |
| to recovery operations | 14 | 15 |
| to other disposal | 20 | 17 |
| Non-hazardous waste | 299 | 294 |
| to recovery operations | 48 | 36 |
| to other disposal | 251 | 258 |
| Total waste | 332 | 327 |
The reportable waste disposal methods are defined based on the disposal codes from the EU regulation 'Regulation (EC) No 1013/2006 of the European Parliament and of the Council of 14 June 2006 on shipments of waste'. These definitions will be applied by our reporting entities. The determination of waste disposal method varies in the company but is mainly based on information from the waste disposal company.
| Total waste in relation to revenues | 2019 | 2020 |
|---|---|---|
| ton/MSEK | 3.2 | 3.8 |
| kton | % | |
|---|---|---|
| Waste 2019 | 332 | |
| Environmental improvement actions | 0 | 0 |
| Other impacts | -5 | -1.6 |
| Waste 2020 | 327 | -1.6 |
Environmental data is derived from our EHS reporting system in which reporting is conducted on a quarterly basis for environmental indicators. The key figures compiled are based on information available at the date of the most recent year-end accounts, which may entail that historical figures have been adjusted. Energy and GHG emission data is calculated based on reported consumption data. The conversion factors are established in our EHS definitions that are held within the management system documentation. These factors originate from the Swedish EPA for scope 1. For scope 2, location-based emission from the use of electricity is derived from reported consumption and converted using emission factors as listed in the GHG-protocol calculation tool version 4.8, except for US-based companies, where the US EPA's Power Profiler tool was used to better accommodate for the difference in carbon footprint within the country's various electricity grids. For the market-based emissions, the consumption data uses specific emission factors, if available, and otherwise the same factors as for location-based emissions.
In the tables showing the reductions of energy, GHG emissions, water and waste, 'Environmental improvement actions' were derived from what was registered from sites that had committed to implement such actions and reported completion at year-end. The remaining difference between 2019 and 2020, whether positive or negative, is reported as 'Other impacts'. Other impacts refer to factors such as those related to weather or production, as well as other items that have an impact but lie outside the control of the activities directly aiming to reduce the environmental impact.
In the data presented for Water discharged, the split of data per GRI Standard 303-4 has been performed by applying allocation keys, where such could be obtained from the locations. The allocation specifies how the water withdrawal was discharged after use. An allocation key was requested from major production sites at the end of 2019 and was applied on data for both 2019 and 2020. These sites have returned an estimated split of their water discharge. Where no such split could be specified, the reported water withdrawal was included as fresh water to a third party. For inclusion in the water-stress category, the major production sites were asked to verify in accordance with the definition as outlined in the GRI Standard 303 if they fulfill the criteria of a water stressed location. All water is deemed as freshwater when drawn in to our production processes.
Sandvik has about 52,000 suppliers located in 98 countries, from which we source raw materials, components, products and services. In 2020, we started to develop working processes within Sustainable Supplier Management to support our commitment to our 2030 Sustainability Goals. A focus area has been to increase internal knowledge and communication related to the sustainability goals within our sourcing network, and to communicate them with suppliers.
During the year we identified 450 potential key suppliers to achieving our sustainability goals. The criteria for and number of suppliers defined as key will change over time, based on the natural supplier lifecycle and depending on the selected suppliers' commitment to meet Sandvik requirements and achieve the targets. A supplier may be selected as key based on their category, spend, criticality or their potential for building partnerships related to our sustainability targets. Discussions on the sustainability targets were initiated with identified key suppliers and are still ongoing.
For Sandvik, circular use of raw materials, for example in our buy-back programs for cemented carbide, has been part of our business model for many years. With this sustainability goal we are strengthening our ambitions within the circular supply chain. During the year, we initiated a discussion with suppliers about new sustainable packaging solutions, including for example recycled materials. In 2020, we made an agreement with a Swedish supplier providing us with corrugated plastic that consists of 80 percent recycled material, with ongoing development projects to reach 100 percent. Another example is the Central Warehouse in Sandviken, Sweden that exchanged their custom-made pallets to refurbished standard pallets.
Our logistics suppliers are important for achieving the climate goal. In 2020, a logistics working group for all Sandvik business areas was established to understand, analyze and optimize our logistics from a climate perspective. We started collecting baseline data of our CO2 emissions from our key logistics suppliers and initiated dialogues with them on CO2 reduction programs. In some cases, we have taken control of transportation for in and outflow of materials, which led to a reduction of packaging material and reduced CO2 emissions.
Health and safety plans are part of the requirements on our suppliers in the Sandvik Supplier Code of Conduct (SSCoC). Suppliers are requested to provide a safe and healthy working environment and take all practicable steps to prevent incidents and injuries. Follow-up on the People goal is included in the Supplier Code of Conduct audits.
The Sandvik Supplier Code of Conduct places requirements on our suppliers in the areas of health and safety, compliance with relevant laws, labor and human rights, environment and anticorruption. As part of the Code, suppliers are requested to cascade Sandvik requirements to their own supply chain.
Sandvik suppliers are assessed for risk of violating the requirements in the Code based on country and category risks and segmented as high, medium or low risk. In 2020, approximately 3.8 percent of our supplier spend was rated as high risk.
By signing the Code, the supplier gives Sandvik the right to perform compliance audits. Due to the global pandemic, it was not possible to perform on-site audits to the same extent as in previous years. During the year, two supplier Code of Conduct audits were performed, both by independent third-party auditors. The pandemic has given us reason to evaluate traditional compliance tools for Code compliance and we are looking into revised methods for the future.
We performed nine follow-up activities and closed 127 of identified audit findings from audits conducted in 2019. Out of 1,877 audit findings identified in 2019, 353 were closed by the end of 2020.
During the year one supplier relation was terminated due to violations of the minimum wage requirement in the Code.
Sandvik condemns all activities in the raw material sector connected to illegal or unlawful exploitation of ores, that directly or indirectly finances or benefits armed groups in conflict areas, or that contribute to serious human rights violations, including child labor, and has adopted measures to manage and mitigate these risks.
Wolfram Bergbau und Hütten, a Sandvik subsidiary based in Austria, is a Conformant Tungsten Smelter that has maintained its compliant status since the company successfully completed the Responsible Minerals Assurance Program (former Conflict-Free Smelter Program) audit in March 2015. It continued to supply the majority of Sandvik's total tungsten in 2020.
Sandvik annually performs a reasonable country of origin enquiry to identify smelters and refiners associated with our supply chain, based on the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas. As of 2020, Sandvik participates in the Responsible Minerals initiative.
Our platform for community involvement includes four areas: Innovation, Education and Skills, Health and Safety and Local Enabler. We gather information about our community involvement initatives biannually and the last one was performed in 2019, when we were involved in about 250 projects.
In 2020, Sandvik engaged in a number of activities related to the Covid-19 pandemic across the globe. It ranged from donating personal protective equipment to hospitals and elderly care homes to supporting vulnerable people affected by the pandemic with food and hygiene kits.
| Standard and disclosure | Page | Comments | |
|---|---|---|---|
| GRI 102: General Disclosures 2016 | |||
| Organizational profile | |||
| 102–1 Name of the organization | 43 | ||
| 102–2 Activities, brands, products, and services | 2–3 | ||
| 102–3 Location of headquarters | 43 | ||
| 102–4 Location of operations | 3, 69, 83 | ||
| 102–5 Ownership and legal form | 43 | ||
| 102–6 Markets served | 1–3 | ||
| 102–7 Scale of the organization | 1, 3, 62–63 | ||
| 102–8 Information on employees and other workers | 132–133 | ||
| 102–9 Supply chain | 37, 137 | ||
| 102–10 Significant changes to the organization and its supply chain | 36–37, 139–140 | ||
| 102–11 Precautionary Principle or approach | 58–60 | ||
| 102–12 External initiatives | 1, 4, 13, 58–59, 130 | ||
| 102–13 Membership of associations | 130 | ||
| Strategy | |||
| GENERAL DISCLOSURES | 102–14 Statement from senior decision–maker | 4–5 | |
| Ethics and integrity | |||
| 102–16 Values, principles, standards, and norms of behavior | 7, 58–60, 130 | ||
| Governance | |||
| 102–18 Governance structure | 43–60 | ||
| Stakeholder engagement | |||
| 102–40 List of stakeholder groups | 130 | ||
| 102–41 Collective bargaining agreements | 131 | ||
| 102–42 Identifying and selecting stakeholders | 130 | ||
| 102–43 Approach to stakeholder engagement | 130 | ||
| 102–44 Key topics and concerns raised | 35, 130 | ||
| Reporting practice | |||
| 102–45 Entities included in the consolidated financial statements | 83 | ||
| 102–46 Defining report content and topic Boundaries | (7–9 ), 58–60, 129–130 | ||
| 102–47 List of material topics | 17, 23, 29, 58–60 | ||
| 102–48 Restatements of information | 130 | ||
| 102–49 Changes in reporting | 130 | ||
| 102–50 Reporting period | 130 | ||
| 102–51 Date of most recent report | 130 | ||
| 102–52 Reporting cycle | 130 | ||
| 102–53 Contact point for questions regarding the report | 143 | ||
| 102–54 Claims of reporting in accordance with the GRI Standards | 130 | ||
| 102–55 GRI content index | 139–140 | ||
| 102–56 External assurance | 130, 141 | ||
| GRI 103: Management approach 2016 | |||
| 103–1 Explanation of the material topic and its Boundaries | |||
| Anti-corruption | 58, 60, 130, 131 | ||
| Materials, Effluents and waste, Water and effluents, Energy, Emissions | 9–10, 134–137 | ||
| Supplier Environmental Assessment, Child Labor, Forced and | 11, 57,130 | ||
| Compulsory Labor, Supplier Social Assessment | |||
| Occupational Health and Safety | 9, 11, 59–60, 133 | ||
| Diversity and equal opportunity, Employment | 9, 11, 59 | ||
| 103–2 The management approach and its components | |||
| Anti-corruption | 11, 58, 60, 130–131, 137 | ||
| Materials, Effluents and waste, Water and effluents, Energy, Emissions | 9, 10, 134 | ||
| Supplier Environmental Assessment, Child Labor, Forced and | 11, 57–61, 137 | ||
| Compulsory Labor, Supplier Social Assessment | |||
| Occupational Health and Safety | 11, 58–60, 133 | ||
| MANAGEMENT APPROACH | Diversity and equal opportunity, Employment | 11, 58–59, 131 | |
| 103–3 Evaluation of the management approach | |||
| Anti-corruption | 58–59, 130, 137 | ||
| Materials, Effluents and waste, Water and effluents, Energy, Emissions | 59–60, 134–137 | ||
| Supplier Environmental Assessment, Child Labor, Forced and | 59–60,130 | ||
| Compulsory Labor, Supplier Social Assessment | |||
| Occupational Health and Safety Diversity and equal opportunity, Employment |
59–60, 133 58–59, 131 |
||
NF12, continued
| Standard and disclosure | Page | Comments | |
|---|---|---|---|
| GRI 403: Occupational Health and Safety 2018 | |||
| 403-1 Occupational health and safety management system | 59–60 | ||
| 403-2 Hazard identification, risk assessment, and incident investigation | 59–60 | ||
| 403-3 Occupational health services | 59–60 | ||
| MANAGEMENT APPROACH | 403-4 Worker participation, consultation, and communication on | 59–60 | |
| occupational health and safety | |||
| 403-5 Worker training on occupational health and safety | 59–60 | ||
| 403-6 Promotion of worker health | 59–60 | ||
| 403-7 Prevention and mitigation of occupational health and safety | 59–60 | ||
| impacts directly linked by business relationships | |||
| GRI 303: Water and effluents 2018 | |||
| 303-1 Interactions with water as a shared resource | 59–60, 135–136 | Not addressed. | |
| 303-2 Management of water discharge-related impacts | 59–60, 135–136 | ||
| GRI 205: Anti-corruption 2016 | |||
| 205-2 Communication and training about anti-corruption policies and | 130–131 | Data per region and employee category not | |
| procedures | available as we follow up training on business | ||
| area rather than region. Data on business | |||
| partners not available. | |||
| GRI 302: Energy 2016 | |||
| 302-1 Energy consumption within the organization | 134–136 | No separate data on cooling. No data on | |
| energy sold. | |||
| 302-3 Energy intensity | 135–136 | ||
| 302-4 Reduction of energy consumption | 134–136 | ||
| GRI 303: Water and effluents 2018 | |||
| 303-3 Water withdrawal | 135–136 | No water withdrawn or discharged to sea. | |
| 303-4 Water discharge | 136 | ||
| Own indicator Water intensity | 136 | ||
| Own indicator Reduction of total water | 136 | ||
| GRI 305: Emissions 2016 | |||
| 305-1 Direct (Scope 1) GHG emissions | 135–136 | Sandvik has no significant stationary | |
| source resulting in biogenic GHG emission. | |||
| The CO₂ equivalents from other green house gases in the reported fuel data was |
|||
| insignificant and amounted to 1 kton 2020 | |||
| based on GWP 265 for N₂O and 28 for CH₄, | |||
| They are not included in the total. | |||
| Base year not applicable. | |||
| 305-2 Energy indirect (Scope 2) GHG emissions | 135–136 | The emission represent no other | |
| greenhouse gases than CO₂. | |||
| TOPIC SPECIFIC | Base year not applicable. | ||
| 305-4 GHG emissions intensity | 135–136 | The emission data represent no other greenhouse gases than CO₂. |
|
| 305-5 Reduction of GHG emissions | 135–136 | The emission data represent no | |
| TOPIC SPECIFIC | other greenhouse gases than CO₂. | ||
| Base year not applicable. | |||
| 305-7 Nitrogen oxides (NOx), sulfur oxides (SOx), and other | 135–136 | POP, HAP and PM not available | |
| significant air emissions | |||
| GRI 306: Effluents and waste 2016 | |||
| 306-2 Waste by type and disposal method | 136 | ||
| Own indicator Waste intensity | 136 | ||
| Own indicator Reduction of total waste | 136 | ||
| GRI 308: Supplier Environmental Assessment 2016 | |||
| 308-2 Negative environmental impacts in the supply chain and actions | 137 | Nine non-compliances to the environ | |
| taken | mental section of the Supplier Code of | ||
| Conduct were identified during the audits | |||
| conducted. One of the suppliers has | |||
| developed a corrective action plan. | |||
| GRI 401: Employment 2016 | |||
| 401-1 New employee hires and employee turnover | 132–133 | ||
| GRI 403: Occupational health and safety 2018 | |||
| 403-9 Work-related injuries | 133–134 | ||
| 403-10 Work-related ill health | 133–134 | ||
| GRI 405: Diversity and equal opportunity 2016 | |||
| 405-1 Diversity of governance bodies and employees | 131–132 | ||
| GRI 408: Child labor 2016 | |||
| 408-1 Operations and suppliers at significant risk for incidents of child labor |
137 | ||
| GRI 409: Forced or compulsory labor 2016 | |||
| 409-1 Operations and suppliers at significant risk for incidents | 137 | ||
| of forced or compulsory labor | |||
| GRI 414: Supplier Social Assessment | |||
| 414-2 Negative social impacts in the supply chain and actions taken | 137 |
Auditor's Limited Assurance Report on the Sustainable Business Report and Statement on the Statutory Sustainability Report
We have been engaged by the Board and the Managing Director to undertake an examination of Sandvik's Sustainable Business Report for 2020. The company has defined the scope of the Sustainable Business Report and the Statutory Sustainability Report on page 130.
The Board of Directors and the Managing Director are responsible for the preparation of the Sustainable Business Report, including the statutory sustainability report, in accordance with the applicable criteria and the Annual Accounts Act. The criteria are described on page 130 of the Sustainable Business Report, and consists of the GRI Sustainability Reporting Standards which are applicable to the Sustainable Business, the Greenhouse Gas Protocol for CO2 emissions as well as the accounting and calculation principles that Sandvik has developed. This responsibility also includes the internal control which is deemed necessary to establish a sustainability report that does not contain material misstatement, whether due to fraud or error.
Our responsibility is to express a conclusion on the Sustainable Business Report based on the procedures we have performed, and to provide a statement on the Statutory Sustainability Report. Our assignment is limited to the historical information that is presented and thus does not include future-oriented information.
We conducted our engagement in accordance with ISAE3000 Assurance Engagements Other than Audits or Reviews of Historical Financial Information. The engagement includes a limited assurance engagement on the complete Sustainable Business Report and audit of certain information as specified below. The objective of an audit is to obtain reasonable assurance that the information is free of material misstatements. A reasonable assurance engagement includes examining, on a test basis, evidence supporting the quantitative and qualitative information in the Sustainable Business Report. A limited assurance engagement consists of making inquiries, primarily of persons responsible for the preparation of the Sustainable Business Report, and applying analytical and other limited assurance procedures. We have conducted our examination regarding the Statutory Sustainability Report in accordance with FAR's recommendation RevR 12, the Auditor's Opinion on the Statutory Sustainability Report. A limited assurance engagement and an examination according to RevR 12 have a different focus and a
considerably smaller scope compared to the focus and scope of an audit in accordance with International Standards on Auditing and other generally accepted auditing standards in Sweden.
The audit firm applies ISQC 1 (International Standard on Quality Control) and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. We are independent in relation to Sandvik according to generally accepted auditing standards in Sweden and have fulfilled our professional ethics responsibility according to these requirements.
The procedures performed in a limited assurance engagement and an examination according to RevR 12 do not allow us to obtain such assurance that we become aware of all significant matters that could have been identified if an audit was performed.
The stated conclusion based on a limited assurance and an examination in accordance with RevR 12, therefore, does not have the security that the conclusion of our reasonable assurance procedures.
Since this assurance engagement is combined, our conclusions regarding the reasonable assurance, the limited assurance and the review according to RevR12 will be presented in separate sections.
Our reasonable assurance engagement includes 2020 data related to the Sustainability Goals We build circularity, We shift climate and We play fair, and specifically the following KPIs:
Our procedures are based on the criteria defined by the Board of Directors and the Managing Director as described above. We consider these criteria suitable for the preparation of the Sustainable Business Report.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our conclusions below.
Based on the limited assurance procedures we have performed, nothing has come to our attention that causes us to believe that the Sustainable Business Report is not prepared, in all material respects, in accordance with the criteria defined by the Board of Directors and the Managing Director.
In our opinion the information in the Sustainable Business Report which has been subject to our reasonable assurance procedures have, in all material respects, been prepared in accordance with the criteria defined by the Board of Directors and the Managing Director.
A Statutory Sustainability Report has been prepared.
Stockholm, March 5, 2021
PricewaterhouseCoopers AB
Peter Nyllinge Authorized Public Accountant
Åsa Ekberg Sustainability Expert, member of FAR
The Annual General Meeting will be held on Tuesday, April 27, 2021.
In view of the Covid-19 pandemic, the Board of Directors has decided that the Annual General Meeting shall be conducted without the physical presence of shareholders, representatives and third parties, and that shareholders shall only be entitled to exercise their voting rights by postal voting before the Meeting.
Shareholders who wish to participate in the Meeting by postal voting must:
– be recorded as shareholder in the share register maintained by Euroclear Sweden AB on Monday, April 19, 2021, and
– give notice of their intention to participate by submitting their postal votes so that these are received by Computershare AB not later than Monday, April 26, 2021.
Shareholders whose shares are registered in the name of a nominee must, to be entitled to participate in the Meeting, temporarily have re-registered the shares in their own name so that the shareholder is registered in the share register as of Monday, April 19, 2021. Please note that this procedure also applies with respect to shares held on a bank's shareholder deposit account and certain investment savings accounts. Request for such voting rights registration shall be made to the nominee, in accordance with the nominee's routines, at such time in advance as decided by the nominee. Voting rights registration that has been made by the nominee no later than
Financial targets for the Sandvik Group are excluding discontinued operations and including Sandvik Materials Technology unless otherwise stated.
Target to be achieved through both organic and acquired growth.
Trough = lowest level through an economic cycle.
Wednesday, April 21, 2021 will be taken into account in the preparation of the share register.
If a shareholder submits its postal vote through a representative, a written and dated proxy signed by the shareholder must be attached to the postal voting form. If the shareholder is a legal person, a registration certificate or other authorization document must be attached to the form.
Further instructions regarding the process for postal voting will be available in the formal notice convening the Meeting and on the company's website, home.sandvik.
The Board of Directors proposes that the 2021 Annual General Meeting declare a dividend of SEK 6.50 per share.
The proposed record date is Thursday, April 29, 2021. If the proposal is adopted by the Annual General Meeting, it is expected that dividends will be paid on Tuesday, May 4, 2021. 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 this change to their bank in sufficient time prior to the record date.
The Annual Report is available at home.sandvik, where a printed copy can also be ordered.
– Target through the economic cycle
– Excluding items impacting comparability
Net debt to equity ratio, including discontinued operations
Earnings before interest and taxes adjusted for items affecting comparability. Corresponds to adjusted operating profit.
Profit/loss for the year attributable to equity holders of the Parent Company divided by the average number of shares outstanding during the year.
Earnings before interest and taxes. Corresponds to operating profit.
Total equity in relation to total capital.
Items with a significant impact on Group or business area results from gains and losses on business disposals, restructuring and impairments costs.
Number of lost time injuries per million worked hours.
Interest-bearing current and non-current debts, including net pension liabilities, less cash and cash equivalents divided by total equity.
Order intake for a period refers to the value of all orders received for immediate delivery and those orders for future delivery for which delivery dates and quantities have been confirmed. General sales agreements are included only when they have been finally agreed upon and confirmed. Service contracts are included in the order intake with the full binding contract amount upon signing.
Revenues for the last quarter annualized divided by average total capital.
Average working capital for the last four quarters, divided by revenues in the last twelve months.
Operating profit/loss plus financial income, as a percentage of a four quarter average capital employed. Capital employed is defined as total capital less current noninterest-bearing debt.
Operating profit/loss plus financial income, as a percentage of four quarter average total capital.
Consolidated net profit/loss for the year as a percentage of average total equity during the year.
SMM is an abbreviation for the Sandvik Manufacturing and Machining Solutions business area.
SMRT is an abbreviation for the Sandvik Mining and Rock Technology business area. As of January 1, 2021 the business area is divided to Sandvik Mining and Rock Solutions (SMR) and Sandvik Rock Processing Solutions (SRP).
SMT is an abbreviation for the Sandvik Materials Technology business area.
Total number of injuries per million worked hours.
Total of inventories, trade receivables, account payables and other current non-interest-bearing receivables and liabilities, excluding tax assets and liabilities and provisions.
If you have any comments on our Annual Report, please contact Group Communications, +46 (0)8 456 11 00 or [email protected].
For comments or questions on sustainability-related information, please contact Sustainable Business, +46 (0)8 456 11 00 or [email protected].
| 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | |
|---|---|---|---|---|---|---|---|---|---|---|
| Revenue, MSEK | 94,084 | 98,529 | 87,328 | 88,821 | 90,822 | 84,430 | 93,906 | 100,924 | 103,533 | 86,409 |
| Change, % | 14 | 5 | -11 | 2 | 2 | -7 | 11 | 8 | +3 | -17 |
| of which organic, % | 20 | 5 | -7 | -2 | -6 | -6 | 10 | 11 | -1 | -11 |
| of which structural, % | 0 | 0 | 0 | 2 | 0 | 0 | 0 | -6 | -1 | -1 |
| of which currency, % | -5 | 0 | -5 | 2 | 8 | -1 | 1 | 2 | 4 | -4 |
| Operating profit, MSEK | 10,148 | 13,490 | 8,638 | 10,120 | 6,062 | 9,657 | 18,011 | 18,103 | 13,182 | 11,184 |
| as % of revenue | 11 | 14 | 10 | 11 | 7 | 11 | 19 | 18 | 13 | 13 |
| Profit after net financial items, MSEK | 8,179 | 11,516 | 6,753 | 8,264 | 4,059 | 7,996 | 16,940 | 17,315 | 11,945 | 11,238 |
| as % of revenue | 9 | 12 | 8 | 9 | 4 | 9 | 18 | 17 | 12 | 13 |
| Consolidated net profit for the year, MSEK | 5,861 | 8,107 | 5,008 | 5,992 | 2,194 | 5,468 | 13,160 | 12,669 | 8,523 | 8,721 |
| Equity, MSEK1⁾ | 31,264 | 32,536 | 33,610 | 36,672 | 34,060 | 39,290 | 48,722 | 58,163 | 61,858 | 65,082 |
| Equity ratio, %1⁾ | 32 | 31 | 36 | 34 | 34 | 38 | 46 | 49 | 51 | 55 |
| , 3⁾ Net debt/equity ratio, multiple 2 |
0.7 | 0.8 | 0.9 | 1.0 | 1.0 | 0.7 | 0.3 | 0.2 | 0,2 | 0,0 |
| Rate of capital turnover, %2⁾ | 100 | 97 | 89 | 89 | 86 | 83 | 90 | 89 | 85 | 72 |
| Cash and cash equivalents, MSEK | 5,592 | 13,829 | 5,076 | 6,327 | 6,376 | 8,818 | 12,724 | 18,089 | 16,987 | 23,752 |
| Return on total equity, %1⁾ | 18.5 | 25.3 | 15.3 | 17.4 | 6.2 | 15.2 | 31.3 | 23.3 | 13.9 | 13.6 |
| Return on capital employed, %1⁾ | 16.0 | 19.8 | 12.6 | 13.4 | 7.9 | 12.9 | 23.8 | 22.0 | 15.0 | 13.3 |
| Investments in non-current assets, MSEK | 4,994 | 4,820 | 4,185 | 4,703 | 4,161 | 3,691 | 3,578 | 3,984 | 4,147 | 3,278 |
| Total investments, MSEK | 5,332 | 4,859 | 4,674 | 7,537 | 4,168 | 3,722 | 3,578 | 8,615 | 6,018 | 6,552 |
| Cash flow from operations, MSEK | 7,764 | 11,892 | 5,133 | 9,515 | 11,952 | 12,032 | 14,286 | 14,914 | 16,894 | 15,347 |
| Cash flow, MSEK | 907 | 8,450 | -8,656 | 1,039 | 79 | 2,288 | 3,963 | 5,382 | -1,188 | 7,261 |
| Number of employees, December 31 | 50,030 | 48,742 | 47,338 | 47,318 | 45,808 | 43,732 | 43,024 | 41,705 | 40,246 | 37,125 |
1) As of 2011, comparative figures adjusted due to amended accounting principles.
2) As of 2011, comparative figures adjusted due to changed definition.
3) As of 2012, net debt includes net pension liabilities.
(All historical figures are adjusted taking into account the 5:1 split).
| 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | |
|---|---|---|---|---|---|---|---|---|---|---|
| Basic earnings, SEK1⁾ | 4.63 | 6.51 | 4.00 | 4.79 | 1.79 | 4.39 | 10.50 | 10.11 | 6.81 | 6.96 |
| Diluted earnings, SEK2⁾ | 4.63 | 6.51 | 4.00 | 4.79 | 1.79 | 4.39 | 10.49 | 10.09 | 6.79 | 6.95 |
| Equity, SEK3⁾ | 25.2 | 25.9 | 26.7 | 29.1 | 27.1 | 31.2 | 38.8 | 46.4 | 49.3 | 51.9 |
| Dividend, SEK (2020 as proposed) | 3.25 | 3.50 | 3.50 | 3.50 | 2.50 | 2.75 | 3.50 | 4.25 | – | 6.50 |
| Direct return, %4⁾ | 3.8 | 3.4 | 3.9 | 4.6 | 3.4 | 2.4 | 2.4 | 3.4 | – | 3.2 |
| Payout percentage, %5⁾ | 70 | 54 | 88 | 73 | 140 | 63 | 33 | 42 | – | 93 |
| Quoted prices, Sandvik Share, highest, SEK | 135 | 107 | 108 | 97 | 107 | 116 | 153.9 | 165.3 | 190.4 | 205.6 |
| lowest, SEK | 73 | 82 | 79 | 74 | 68 | 65 | 113.5 | 123.1 | 122.7 | 115.5 |
| year-end, SEK | 84 | 103.50 | 90.70 | 76.40 | 74.05 | 112.70 | 143.7 | 126.4 | 182.7 | 201.3 |
| No. of shares at year-end, million | 1,186.3 | 1,254.4 | 1,254.4 | 1,254.4 | 1,254.4 | 1,254.4 | 1,254.4 | 1,254.4 | 1,254.4 | 1,254.4 |
| Average no. of shares, million | 1,186.3 | 1,245.9 | 1,254.4 | 1,254.4 | 1,254.4 | 1,254.4 | 1,254.4 | 1,254.4 | 1,254.4 | 1,254.4 |
| P/E ratio6⁾ | 18.2 | 15.9 | 22.7 | 15.9 | 41.4 | 25.7 | 13.7 | 12.5 | 26.9 | 28.9 |
| 7⁾ Quoted price, % of equity2, |
333 | 400 | 340 | 261 | 273 | 361 | 370 | 273 | 370 | 388 |
1) Profit for the year per share.
2) Profit for the year after dilution of outstanding convertible program.
3) As of 2011, comparative figures adjusted due to amended accounting principles.
4) Dividend by 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.
| Revenue | Operating profit and operating margin | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2018 | 2019 | 2020 2018 |
2019 | 2020 | |||||
| MSEK | MSEK | MSEK | MSEK | % | MSEK | % | MSEK | % | |
| Sandvik Mining and Rock Technology | 41,058 | 44,777 | 40,032 | 7,452 | 18 | 8,602 | 19 | 7,389 | 18 |
| Sandvik Manufacturing and Machining Solutions | 40,757 | 41,123 | 32,477 | 9,922 | 24 | 8,380 | 20 | 4,606 | 14 |
| Sandvik Materials Technology | 14,697 | 15,279 | 13,598 | 1,307 | 9 | 1,444 | 9 | 492 | 4 |
| Other operations | 3,560 | 2,059 | 297 | 659 | 19 | -4,263 | n/m | -578 | n/m |
| Discontinued operations | 852 | 295 | 6 | -552 | -65 | -204 | -69 | -32 | n/m |
For more key figures, please visit our investors page at home.sandvik
Design and production: Sandvik and Narva. Print: Elanders Sweden, 2021.
Photo: Karl Nordlund, Sandvik.
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