Sandvik

Annual Report • Jan 29, 2013

Q4 Sandvik Interim report on the fourth quarter and full-year 2012

Record cash fl ow but earnings impacted by nonrecurring items

CEO's comment:

"The fourth quarter was characterized by a level of business activity that was on par with the third quarter. Order intake thus declined somewhat to 21.1 billion SEK, while invoiced sales amounted to 24.3 billion SEK.

This marked the second consecutive quarter with a negative book-to-bill ratio. Our efforts to improve capital efficiency were successful as inventories were reduced by 1.4 billion SEK. Although the lower production levels negatively impacted fourth-quarter earnings as a result of underabsorption, the significant reduction in inventory contributed to record operating cash flow of 4.5 billion SEK," says Sandvik's President and CEO Olof Faxander.

"The implementation of the structural improvements announced during the quarter is under way. In total, these adjust ments entailed nonrecurring charges of about 920 million SEK in the quarter. Adjusted for these charges, operating profit totaled 3.1 billion SEK, or 12.6% of invoiced sales. The workforce was reduced by about 500 persons.

The year 2012 was eventful for Sandvik. We celebrated our 150th anniversary, our new strategy was implemented and market conditions went from strong to more challenging. I am very pleased with the signifi cant improvements achieved during the year in our two turnaround cases: Sandvik Materials Technology and Sandvik Construction.

The Board of Directors proposes a dividend of 3.50 SEK (3.25) per share."

Financial overview, MSEK	Q4 2012	Q4 2011	Change %	Q1-4 2012	Q1-4 2011	Change %
Order intake1)	21 070	23 990	-10	97 948	99 078	-1
Invoiced sales 1)	24 328	25 104	0	98 529	94 084	+5
Gross profit	7 531	8 044	-6	34 703	32 380	+7
% of invoiced sales	31.0	32.0		35.2	34.4
Operating profit	2 134	1 649	+29	13 490	10 148	+33
% of invoiced sales	8.8	6.6		13.7	10.8
Adjusted operating profit 2)	3 058	3 240	-6	14 747	13 518	+9
% of invoiced sales 2)	12.6	12.9		15.0	14.4
Profit after financial items	1 627	1 140	+43	11 516	8 179	+41
% of invoiced sales	6.7	4.5		11.7	8.7
Profit for the period	726	803	-10	8 107	5 861	+38
% of invoiced sales	3.0	3.2		8.2	6.2
of which shareholders' interest	728	731	-0	8 105	5 498	+47
Earnings per share, SEK 3)	0.58	0.62	-6	6.51	4.63	+41
Return on capital employed, % 4)	19.8	16.0		19.8	16.0
Cash flow from operations	+4 520	+3 312	+36	+11 892	+7 764	+53
Number of employees	48 742	50 030	-3	48 742	50 030	-3

1) Change from the previous year at fixed exchange rates for comparable units.

2) Operating profit adjusted for nonrecurring charges: Q4 2012 by about 920 million SEK, Q4 2011 by about 1,600 million SEK and Q3 2011 by about 1,700 million SEK.

3) Calculated on the basis of the shareholders' share of profit for the period. No dilutive impact during the period.

4) Rolling 12 months.

For additional information, please call Sandvik Investor Relations +46 8 456 12 40 or visit www.sandvik.com

Q4 Sandvik Market and sales

10 11 12 Quarter 30 000 24 000 18 000 12 000 6 000 0 MSEK Quarter MSEK Rolling 100 000 80 000 60 000 40 000 20 000 0 Rolling 12 months

Invoiced sales

Q4	Order intake	Invoiced sales
Price/volume, %	-10	0
Structure, %	0	0
Currency, %	-3	-2
Total, %	-12	-3

The table is multiplicative, i.e. the different components must be multiplied to determine the total effect.

Overall demand for Sandvik's products during the fourth quarter remained largely on par with the third quarter. Activity in the aerospace, oil/gas and process industries remained at reasonably high levels, while the mining, construction and automotive industries were weak. Demand was strong in North America and improved from an already high level in Africa, but deteriorated in other major markets. Order intake amounted to 21.1 billion SEK, a decline of 10% compared with the preceding year at fixed exchange rates. Invoicing for the quarter totaled 24.3 billion SEK, flat year-on-year at fixed exchange rates for comparable units. Changed exchange rates had a negative impact on order intake and invoiced sales of 3% and 2%, respectively.

As in the preceding quarter, the global industrial business climate was weak during the fourth quarter. Compared with 2011, demand remained strong in North America, driven by the aerospace industry. The business conditions in Europe remained challenging, as demand deteriorated primarily in the construction industry. Several other markets recorded declines compared with the preceding year. The trend in Africa/Middle East remained positive, where the mining industry developed strongly driven primarily by high demand from gold miners. The continent accounted for 14% of Sandvik's total order intake, a historically high fi gure and making it the largest market area for Sandvik Mining.

The weak demand for mining and construction equipment and systems continued during the fourth quarter. Business activity for Sandvik Machining Solutions remained high but slightly below the high levels noted earlier in the year. Strong demand from the aerospace segment in North America was offset by weak demand from the general engineering industry in China. The market situation for Sandvik Materials Technology remained difficult, with stable

development in parts of the energy segment and weak performance in other areas. Market demand was mixed for Sandvik Venture.

The book-to-bill ratio was negative for the second consecutive quarter, and the order book was thus reduced.

Order intake in the fourth quarter amounted to 21,070 million SEK (23,990), down 12% in total and 10% at fixed exchange rates for comparable units. Of this amount, approximately 0.9 billion SEK (0.9) represented major orders for mining systems for Sandvik Mining. Changed exchange rates had a negative impact of 3% on order intake. Order intake declined for all business areas at fixed exchange rates for comparable units. The trend for Sandvik Mining was negative 5% while it was negative 4% for Sandvik Machining Solutions. Sandvik Materials Technology's order intake declined by 9% compared with the fourth quarter of the preceding year, including a negative effect of 4 percentage points related to changed metal prices. Sandvik Construction and Sandvik Venture reported declines of 22% and 33%, respectively, at fixed exchange rates for comparable units.

Invoiced sales totaled 24,328 million SEK (25,104), down 3% in total and flat at fixed exchange rates for comparable units compared with the fourth quarter of 2011. Changed exchange rates had a negative impact of 2% on invoiced sales. For Sandvik Mining, invoiced sales increased by 10% at fixed exchange rates for comparable units, while Sandvik Machining Solutions and Sandvik Construction declined 4% and 2%, respectively. Sandvik Materials Technology's invoiced sales declined by 7% compared with the year-earlier period, including a negative effect of 3 percentage points related to changed metal prices. For Sandvik Venture, invoicing declined by 17% at fixed exchange rates for comparable units, despite strong performance by the Sandvik Process Systems product area.

Q4 Sandvik Earnings and return

Operating profi t and return

Additional potential for structural improvements was identified which, combined with measures to adjust costs to the weaker demand, are expected to yield savings in excess of 1 billion SEK in yearly run-rate by year-end 2013. Improvement efforts entailed nonrecurring charges of about 920 million SEK during the quarter. Adjusted for these charges, operating profit amounted to 3,058* million SEK (3,240**), or 12.6%* (12.9**) of invoiced sales. In addition, production rates were further reduced to align inventory levels with the weaker demand. This adversely impacted operating profit, but contributed significantly to a strong cash flow. Changed exchange rates had no effect on earnings, while changed metal prices had a negative impact of 65 million SEK. Return on capital employed for the most recent 12-month period was 19.8% (16.0) including a negative effect of nonrecurring items.

Changed exchange rates had no impact on earnings in the fourth quarter. Net financial items amounted to -507 million SEK (-509). Changes to the Swedish corporate tax rate reduced net tax assets by nearly 500 million SEK, resulting in a temporarily elevated tax rate of 55.4% for the fourth quarter (29.6).

The favorable development in the management of accounts receivable, combined with significant inventory reductions for all business areas, resulted in an improvement in working capital. Together with earnings, the enhanced capital efficiency yielded cash flow from operations of +4,520 million SEK (+3,312), the highest level for cash flow recorded to date in a single quarter.

There was a slight increase in total assets compared with the preceding quarter. Inventories and accounts receivables were reduced through focused efforts in combination with a strengthening of the SEK. However, this reduction was more than offset by increased cash. Net working capital as percentage of invoiced sales was 27%, up on the year-earlier period (26), but lower than in the preceding quarter (30). The strong cash flow generation increased the cash position and further reduced net debt to 21.8 billion SEK (25.9). Accordingly, the net debt to equity ratio declined to 0.6 compared with the preceding quarter (0.7) and year (0.8). Currently, Sandvik has unutilized and committed long-term credit facilities comprising 650 million EUR and 5 billion SEK. The credit market remained very favorable for a company of Sandvik's size, credit rating and reputation. Loans with very long maturities are available at historically low interest rates. In October, Sandvik raised a loan of 250 million EUR with a 10-year maturity from the European Investment Bank, based on Sandvik's European R&D investments. The current interest rate is 2.29% per annum.

* Operating profit in the fourth quarter of 2012 amounted to 2,134 million SEK, or 8.8% of invoiced sales, including nonrecurring charges. ** Operating profit in the fourth quarter of 2011 amounted to 1,649 million SEK, or 6.6% of invoiced sales, including nonrecurring charges.

Earnings per share

Q4 Sandvik Mining

Customers reducing capex

Strong invoicing

Inventory and working capital reductions

Growth

Q4	Order intake	Invoiced sales
Price/volume, %	-5	+10
Structure, %	0	0
Currency, %	-2	-2
Total, %	-7	+8

The table is multiplicative, i.e. the different components must be multiplied to determine the total effect.

The demand for most of Sandvik Mining's products was weak during the fourth quarter. Stable demand was noted for rock tools, parts and services, while demand for new equipment was weak and business conditions unfavorable for mining systems. Order intake declined by 5% to 7.7 billion SEK (8.3) at fixed exchange rates compared with the year-earlier period. Activity remained high in Africa, while Asia and Australia reported declines. Invoiced sales increased by 10% at fixed exchange rates and amounted to 9,812 million SEK (9,105). Adjusted for nonrecurring charges (-170 mil-

lion SEK), the operating profit and margin amounted to 1,373 million SEK (1,389) and 14.0% (15.3), respectively, of invoiced sales.

Several measures to align costs with the weak demand and improve the long-term performance of the business area are being implemented.

Demand was low in most areas where Sandvik Mining operates due to the reduced investment ambitions of several customers. China and Australia noted the most significant fall-off in orders from coal and iron ore mines, while demand from Africa remained strong supported by high gold prices. Demand for rock tools, parts and services remained unchanged and was seasonally weaker towards the end of the quarter, while demand for new equipment

was weak throughout the quarter and tendering activity was low for mining systems. During the quarter, Sandvik Mining secured a major order worth 650 million SEK from Sasol Mining (Pty) Ltd in South Africa. The number of order cancellations during the quarter was limited. However, a customer in South America cancelled a major mining systems order, which will negatively affect order intake in the first quarter of 2013 by approximately 600 million SEK. The exploration business noted a continued weak market, primarily in Australia. Invoiced sales increased 10% at fixed

exchange rates supported by the strong order backlog accumulated in earlier quarters. The book-to-bill ratio recorded during the second half of 2012 was negative.

Operating profit was negatively affected by nonrecurring charges (-170 million SEK), currency effects (-20 million SEK) and underutilization, and amounted to 1,203 million SEK (1,220), or 12.3% (13.4) of invoiced sales.

Of invoiced sales, rock tools and consumables accounted for 10% (11), customer services and spare parts for 32% (36) and equipment and mining systems for 34% (35) and 24% (18), respectively. Working capital declined significantly as inventory levels were reduced. Return on capital employed for the most recent 12-month period was 38.5% (39.4).

Financial overview, MSEK	Q4 2012	Q4 2011	Change %	Q1-4 2012	Q1-4 2011	Change %
Order intake	7 683	8 284	-5 *	38 289	35 619	+7 *
Invoiced sales	9 812	9 105	+10 *	37 762	32 232	+17 *
Operating profi t	1 203	1 220	-1	6 004	5 189	+16
% of invoiced sales	12.3	13.4		15.9	16.1
Adjusted operating profi t**	1 373	1 389	-1	6 174	5 412	+14
% of invoiced sales**	14.0	15.3		16.3	16.8
Return on capital employed, %,	38.5	39.4		38.5	39.4
rolling 12 months
Number of employees	14 054	13 298	+6	14 054	13 298	+6

* At fi xed exchange rates for comparable units

** Operating profit adjusted for nonrecurring charges in the fourth quarters of 2011 and 2012, respectively

Q4 Sandvik Machining Solutions

Stable market conditions

Strong cash flow and inventory reduction

First order received by the Carboloy brand

Growth

Q4	Order intake	Invoiced sales
Price/volume, %	-4	-4
Structure, %	0	0
Currency, %	-3	-3
Total, %	-7	-7

The table is multiplicative, i.e. the different components must be multiplied to determine the total effect.

driven by parts of the automotive segment.

Demand for Sandvik Machining Solutions' products decreased slightly from the high levels recorded last year, but remained relatively unchanged from the preceding quarter. Compared with the preceding year, both order intake and invoiced sales decreased by 4%, amounting to 6.8 and 6.9 billion SEK (7.4 and 7.4) respectively, at fixed exchange rates for comparable units. Favorable demand in North America was more than offset by declines in the other major markets compared with the preceding year. Operating profit was negatively affected by nonrecurring charges (about -80 million SEK) and underutilization. Changed exchange rates impacted earnings by approximately -25 million SEK in the quarter.

Continued strong business conditions in the fourth quarter in the aerospace industry and improved demand from the automotive industry in North America was not enough to fully ease the fiscal concerns in the US that are having an adverse affect on customer behavior. Demand in Europe remained on par with the preceding year, although differences were notable between countries and segments. Strong demand in Southeast Asia was more than offset by weak demand in China and Japan. Demand in South America developed unfavorably,

Production rates were further reduced during the quarter as inventory levels were adjusted to address the weaker business climate. Additionally, efforts to structurally reduce inventories at Seco Tools continued successfully during the fourth quarter. Combined with lower accounts receivable, these inventory reductions were the main factors behind the very strong cash flow recorded.

The first order for the Carboloy brand was received from a customer in China during the quarter. Carboloy forms part of the business area's strategically important mid-market initiative, predominantly addressing the

growing Asian market.

Nonrecurring charges affected earnings adversely by approximately 80 million SEK. Furthermore, operating profit was impacted by currency effects (-25 million SEK) and by underabsorption of fixed costs due to lower production rates and totaled 1,240 million SEK (1,549), or 18.1% (21.0) of invoiced sales. Return on capital employed for the most recent 12-month period was 32.0% (33.6).

Jonas Gustavsson, currently President of Sandvik Materials Technology has been appointed President of Sandvik Machining Solutions as of 1 February. He succeeds Andreas Evertz, who will leave Sandvik to pursue opportunities outside the Group.

Financial overview, MSEK	Q4 2012	Q4 2011	Change %	Q1-4 2012	Q1-4 2011	Change %
Order intake	6 849	7 358	-4 *	28 717	28 737	+0 *
Invoiced sales	6 865	7 364	-4 *	28 482	28 171	+1 *
Operating profi t	1 240	1 549	-20	6 256	6 347	-1
% of invoiced sales	18.1	21.0		22.0	22.5
Adjusted operating profi t**	1 323	1 695	-22	6 339	6 485	-2
% of invoiced sales**	19.3	23.0		22.2	23.0
Return on capital employed, %,	32.0	33.6		32.0	33.6
rolling 12 months
Number of employees	18 333	18 491	-1	18 333	18 491	-1

* At fi xed exchange rates for comparable units

** Operating profit adjusted for nonrecurring charges in the fourth quarters of 2011 and 2012, respectively

Q4 Sandvik Materials Technology

Stable, but weak business conditions

Continued improvements in underlying profitability

Strong cashflow

Growth

Q4	Order intake	Invoiced sales
Price/volume, %	-9	-7
Structure, %	0	0
Currency, %	-1	-1
Total, %	-10	-8

The table is multiplicative, i.e. the different components must be multiplied to determine the total effect.

The positive profitability trend continued for Sandvik Materials Technology as the implementation of the Step Change turnaround program progressed. The continued weak market called for the program to be further expanded, but it also aims to establish a more robust profitability level.

Similar to previous quarters, demand from the oil and gas sector was stable, while most other areas remained weak. Order intake declined by 9% and invoicing by 7% at fixed exchange rates, compared with the preceding year. Changed metal prices had a negative impact on order intake and invoiced sales of 4% and 3%, respectively. Operating profit was adversely affected by nonrecurring charges (about -670 million SEK) and metal price effects (-65 million SEK), and thus totaled -351 million SEK, or -9.7% (-22.7) of invoiced sales.

The market conditions continued to present a challenge for most of Sandvik Materials Technology's major markets and segments during the fourth quarter. Demand from the oil and gas sector remained stable and was unchanged, although it was noted that the time from tender to order was prolonged for some projects. The general engineering industry remained stable at a low level. Conditions for the low value-added offering in Europe were particularly challenging, with con-

tinued price pressure. While most major markets recorded declining demand, activity in Asia increased from low levels mainly due to improved demand for tubes used by the fertilizer industry.

To further adapt inventory to the subdued

levels of demand, production rates were maintained at levels below sales. This inventory reduction, in combination with lower accounts receivables and continued improved underlying earnings, contributed to a very strong cash flow.

The Step Change turnaround program was extended during the fourth quarter. The ambition is to further strengthen Sandvik Materials Technology as a long-term value-creating business area, enabling it to achieve a more stable level of profitability over a business cycle, and to manage the weak business climate. Additional cost savings of more than 300 million SEK in total are targeted for the end of 2013.

Despite the challenging market the positive profitability trend continued during the fourth quarter. Underabsorption of fixed costs due to low production rates, and metal price effects of -65 million SEK (-125) were more than offset by cost savings and efficiency gains. Operating profit, adjusted for metal price effects and nonrecurring charges (about -670 million SEK), amounted to 381 million SEK (71), or 10.5% (1.8) of invoiced sales. Changed exchange rates had no effect on earnings. Return on capital employed for the most recent 12-month period was 4.2% (n.a). Adjusted for charges of non-recurring nature, return on capital employed amounted to 8.9%.

Petra Einarsson, currently head of the Tube product area

at Sandvik Materials Technology has been appointed President of Sandvik Materials Technology as of 1 February. She succeeds Jonas Gustavsson, who assumes the position as President of Sandvik Machining Solutions.

Financial overview, MSEK	Q4 2012	Q4 2011	Change %	Q1-4 2012	Q1-4 2011	Change %
Order intake	3 312	3 674	-9 *	14 708	16 350	-11 *
Invoiced sales	3 620	3 940	-7 *	15 366	16 339	-6 *
Operating profi t	-351	-896	+61	592	-642	N/A
% of invoiced sales	-9.7	-22.7		3.9	-3.9
Adjusted operating profi t**	317	-54	N/A	1 259	692	+82
% of invoiced sales**	8.7	-1.4		8.2	4.2
Return on capital employed, %,	4.2	N/A		4.2	N/A
rolling 12 months
Number of employees	7 307	8 166	-11	7 307	8 166	-11

* At fi xed exchange rates for comparable units, including effects from changed metal prices.

** Operating profit adjusted for nonrecurring charges in the fourth quarters of 2011 and 2012, respectively

Q4 Sandvik Construction

Weak market conditions

Stable invoicing

Significant inventory reduction

Growth

Q4	Order intake	Invoiced sales
Price/volume, %	-22	-2
Structure, %	+1	+1
Currency, %	-4	-3
Total, %	-23	-4

The table is multiplicative, i.e. the different components must be multiplied to determine the total effect.

Sandvik Construction undertook substantial efforts to reduce inventory during the quarter, in response to the continued very low level of activity in the global construction market. Order intake declined by 22% compared with the preceding year at fixed exchange rates, and amounted to 1,793 million SEK (2,330). However, supported by the order backlog, invoiced sales amounted to 2,382 million SEK (2,484), corresponding to a decline of 2% at fixed exchange rates.

Operating profit was negatively affected by underabsorption of fixed costs and amounted to 83 million SEK (-255), or 3.5% (-10.3) of invoiced sales.

The negative trend continued in the market in which Sandvik Construction operates. Demand in Europe weakened further as activity in the southern regions of the continent was particularly low. The sluggish state of the construc-

tion market in China was confirmed by the postponement of projects by a number of customers, thereby also affecting Sandvik's Chinese crusher manufacturer Shanbao. North American customers were hesitant as fiscal uncertainties in the US weighed on sentiment in the fourth quarter.

Demand for tools, consumables and services remained stable as customers maintained production rates, while stationary crushing, screening and systems noted declines.

As a further response to the low level of demand, Sandvik Construction reduced production rates during the quarter to align with inventory levels. Net working capital declined sharply in absolute terms and, despite weaker sales, even in relative terms, and amounted to 25% as a percentage of invoiced sales (28).

Earnings were adversely affected by a larger portion of project invoicing characterized by high capital efficiency, but lower margins. Furthermore, while the low production levels contributed strongly to cash flow, the impact on earnings was negative. This, combined with increased stock obsolescence reserves and an impact of -35 million SEK due to changed currency rates, yielded an operating profit of 83 million SEK (-255), or 3.5% (-10.3) of invoiced sales.

Return on capital employed for the most recent 12-month period was 12.5% (1.0).

At the end of November, Andy Taylor assumed the position as acting President of Sandvik Construction, as Thomas Schulz is leaving for a position outside Sandvik.

Financial overview, MSEK	Q4 2012	Q4 2011	Change %	Q1-4 2012	Q1-4 2011	Change %
Order intake	1 793	2 330	-22 *	9 013	9 898	-12 *
Invoiced sales	2 382	2 484	-2 *	9 683	9 249	+1 *
Operating profi t	83	-255	N/A	748	58	N/A
% of invoiced sales	3.5	-10.3		7.7	0.6
Adjusted operating profi t**	83	22	+377	748	339	+121
% of invoiced sales**	3.5	0.9		7.7	3.7
Return on capital employed, %,	12.5	1.0		12.5	1.0
rolling 12 months
Number of employees	3 289	3 872	-15	3 289	3 872	-15

* At fi xed exchange rates for comparable units

** Operating profit adjusted for nonrecurring charges in the fourth quarter of 2011

Q4 Sandvik Venture

Continued mixed market conditions

Strong profitability

Inventory reductions and strong cash flow

Growth

Q4	Order intake	Invoiced sales
Price/volume, %	-33	-17
Structure, %	-4	-6
Currency, %	-3	-3
Total, %	-39	-26

The table is multiplicative, i.e. the different components must be multiplied to determine the total effect.

Demand for Sandvik Venture's products varied among the different product areas. Activity remained high for Sandvik Process Systems, while all other product areas recorded weaker demand, primarily Wolfram. Order intake thus declined 33% compared with the corresponding quarter in the preceding year and invoiced sales declined 17% at fixed exchange rates for comparable units. Total order intake amounted to 1,431 million SEK (2,342) and invoiced sales to 1,639 million SEK (2,202). Although operating profit was negatively affected by the decline in sales, it still amounted to 260 million SEK (316), or 15.9% (14.3) of invoiced sales.

The business conditions remained mixed among Sandvik

Venture's product areas. Demand continued to develop strongly for Sandvik Process Systems in most major markets. Activity remained high in the chemical, sulphur and food segments. All other product areas experienced weak or even declining demand. Of the major regions, the most significant decline in order intake was noted

in Europe as demand for tungsten and tungsten-based materials was negatively affected by economic uncertainty and customers destocking. Performance in North America was mixed, while the Asian market weakened due to low activity in Japan and South Korea. Volatility in the price of tungsten carbide contributed to a general sense of uncertainty in the market.

Production rates were reduced in all product areas, with the exception of Sandvik Process Systems. The inflow of scrap-based raw material continued through the strategically important repurchasing programs for used cemented-carbide products from customers. To balance this inflow, Wolfram curbed production rates significantly to adjust inventory levels to the weak business conditions. Inventory levels were thus reduced considerably with contributions from all product areas.

Internal efficiency contributed positively to earnings, but was not enough to offset the negative

effect of declining sales on earnings. The profit margin thus amounted to 15.9% (14.3) of invoiced sales and operating profit amounted to 260 million SEK (316). Changed exchange rates had no impact on earnings in the quarter. Return on capital employed for the most recent 12-month period was 16.6% (n.a).

On 1 November, Tomas Nordahl assumed the position as President of Sandvik Venture. He succeeded Anders Thelin, who retired after 35 successful years at Sandvik.

Financial overview, MSEK	Q4 2012	Q4 2011	Change %	Q1-4 2012	Q1-4 2011	Change %
Order intake	1 431	2 342	-33 *	7 218	8 473	-11 *
Invoiced sales	1 639	2 202	-17 *	7 194	8 056	-6 *
Operating profi t	260	316	-18	1 238	-21	N/A
% of invoiced sales	15.9	14.3		17.2	-0.3
Adjusted operating profi t**	260	458	-76	1 238	1 351	-8
% of invoiced sales	15.9	20.8		17.2	16.8
Return on capital employed, %,	16.6	N/A		16.6	N/A
rolling 12 months
Number of employees	3 558	4 107	-13	3 558	4 107	-13

* At fi xed exchange rates for comparable units, including effects from changed metal prices.

** Operating profit adjusted for nonrecurring charges in the fourth quarter of 2011

Full-year 2012

Global market conditions improved significantly during the first half of the year, but weakened during the second half. This demand pattern applied to all business areas, but was most pro-

nounced for Sandvik Mining and Sandvik Construction. Accordingly, Sandvik's full-year order intake declined by 1% at fixed exchange rates for comparable units and amounted to 97,948 million SEK (99,078). Supported by a stronger order backlog, invoiced sales increased by 5% at fixed

exchange rates and totaled 98,529 million SEK (94,084).

Toward the end of the year, additional structural measures were announced with the aim of further improving the company and adjusting costs in response to the weaker demand. Consequently, operating profit was adversely affected by nonrecurring charges and amounted to 13,490 million SEK (10,148), or 13.7% (10.8) of invoiced sales. Changed exchange rates had a positive effect of about 150 million SEK on full-year earnings, compared with 2011, while changed metal prices impacted the result by -281 million SEK.

Net financial items amounted to -1,974 million SEK (-1,969) and profit after financial items was 11,516 million SEK (8,179). The tax rate was 30% (28) and profit for the period amounted to 8,107 million SEK (5,861). Earnings per share were 6.51 SEK (4.63).

Cash flow from operations was +11,892 million SEK (+7,764). The Group's investments in fixed assets amounted to 4,820 million SEK (4,994), with company acquisitions accounting for 39 million SEK (338). After investments, acquisitions and divestments, cash flow was +7,961 million SEK (+2,584).

Parent company

The Parent Company's invoiced sales for the fourth quarter of 2012 amounted to 4,146 million SEK (4,205) and the operating result was -284 million SEK (-1,680). For full-year 2012, invoiced sales amounted to

16,990 million SEK (17,460) and the operating result was -483 million SEK (-2,754).

The operating result for the fourth quarter 2012 was negatively impacted by metal price effects, higher pension provisions and the impairment of property, plant and equipment.

Income from shares in Group companies consists primarily of dividends and Group contributions from these and amounted to 11,769 million SEK (2,815) for full-year 2012. Interest-bearing liabilities, less cash and cash equivalents and interest-bearing assets, amounted to 20,388 million SEK (16,990). Investments in property, plant and equipment amounted to 1,338 million SEK (1,421).

The 2012 acquisition of Seco Tools had a significant impact on the Parent Company´s balance sheet, resulting in a raised level of indebtedness as a result of higher liabilities and increased equity due to the new issue.

Acquisitions and divestments

Sandvik's public offer to the minority shareholders of Seco Tools to acquire all remaining shares in the company, against payment in Sandvik shares, was not acquired under the public offer. Consequently, Sandvik now holds 100% of all shares and votes in Seco Tools. On 30 March 2012, Sandvik Medical Solutions was

divested. On 31 December 2011, assets and liabilities related to Sandvik Medical Solutions were classified as held for sale. The transaction on 30 March had a marginal effect on the result for full-year 2012.

Significant acquisitions during the most recent 18-month period

completed in February 2012. In the ongoing compulsory acquisition procedure, Sandvik was granted advance title in June 2012 to all remaining shares in Seco Tools that were

	Company/unit	Closing date	Annual revenue MSEK	No of employees
Sandvik Construction	Shanbao (SJL), China	9 Oct 11	>500	500

Significant divestments during the most recent 18-month period

	Company/unit	Closing date	Annual revenue MSEK	No of employees
Sandvik Venture	Sandvik Medical Solutions	30 Mar 12	~600	550

Signifi cant events

• In December, Andy Taylor assumed the position as acting President of Sandvik Construction, alongside his assignment as Vice President Finance for the business area. He replaced

Thomas Schulz, who is leaving Sandvik for a position outside the Group.

• Toward the end of the quarter, Sandvik Mining received a major order from Sasol Mining (Pty) Ltd in South Africa for materials handling systems. The scope of supply includes engineering design, procurement and construction for a new coal mine. The order, valued at approximately 650 million SEK will contribute to Sandvik Mining's business during the 2013-2015 period.

• As of January 1, 2013, new accounting rules for employee benefits (IAS19) will become effective. Among other changes this entails a material effect on recognized pension liability and equity as well as volatility in these items. As a

consequence, Sandvik has chosen to exclude pension liabilities entirerly from the net debt to equity target as from the first quarter 2013. The target for the net debt to equity ratio is maintained at <0.8.

• A customer in South America cancelled a contract for a large materials handling and crushing system to a copper mine. Consequently, the negative impact on order intake is estimated to be approximately 600 million SEK in the first quarter of 2013. No material effect on earnings is expected.

• On 1 February, Jonas Gustavsson, currently President of Sandvik Materials Technology assumes the position as President of Sandvik Machining Solutions. He succeeds Andreas Evertz, who will leave Sandvik to pursue opportunities outside the Group. At the same date, Petra Einarsson, currently head of the Tube product area at Sandvik Materials Technology assumes the position as President of Sandvik Materials Technology and member of Sandvik's Group Executive Management.

Status structural measures

Activities are being carried out to structurally improve the company and adjust costs to the weaker demand as announced on 28 November 2012. Actions

mainly include the consolidation of units, reductions in the workforce and termination of third party contracts.

Savings and approximate nonrecurring charges for approved and anticipated actions are broken down as follows:

Million SEK	Sandvik Mining	Sandvik Machining Solutions	Sandvik Materials Technology	Sandvik Construction	Sandvik Venture	Sandvik Group
Nonrecurring charges Q4, 2012	170	80	670	-	-	920
Nonrecurring charges 2013	180	200	-	-	-	380
Total nonrecurring charges	350	280	670	-	-	1,300
of which, impacting cash fl ow						750
Estimated cost savings	>500	150	>300	>100	-	>1,000

Dividend proposal to the 2013 AGM

The Annual General Meeting will be held in Sandviken, Sweden on 25 April at 17:00 CET. The 2012 Annual Report will be available in the last week of March on www.sandvik.com. A printed

version of the report can also be ordered on the website. The Board of Directors proposes a dividend of 3.50 SEK per share (3.25), or a total of 4,390 million SEK (4,077) for 2012. The proposal corresponds to 54% of reported earnings per share. The proposed record date to receive dividends is 30 April.

Financial reports summary

The Group

Income statement

MSEK	Q4 2012	Q4 2011	Change %	Q1-4 2012	Q1-4 2011	Change %
Revenue	24 328	25 104	-3	98 529	94 084	+5
Cost of sales and services	-16 797	-17 060	-2	-63 826	-61 704	+3
Gross profit	7 531	8 044	-6	34 703	32 380	+7
% of revenues	31.0	32.0		35.2	34,4
Selling expenses	-3 097	-3 367	-8	-11 935	-13 095	-9
of which goodwill write-down in MedTech	-	-1 160	-	-	-1 160	-
Administrative expenses	-1 637	-2 028	-19	-6 362	-6 416	-1
Research and development costs	-738	-682	+8	-2 572	-2 421	+6
Other operating income and expenses	75	-318	-	-344	-300	-
Operating profit	2 134	1 649	+29	13 490	10 148	+33
% of revenues	8.8	6.6		13.7	10,8
Financial net	-507	-509	-0	-1 974	-1 969	+0
Profit after financial items	1 627	1 140	+43	11 516	8 179	+41
% of revenues	6.7	4.5		11.7	8,7
Income tax	-901	-337	+167	-3 409	-2 318	+47
Profit for the period	726	803	-10	8 107	5 861	+38
% of revenues	3.0	3.2		8.2	6,2
Other comprehensive income
Foreign currency translation differences	285	-735		-1 584	-270
Cash-flow hedges	-75	-112		140	-622
Tax related to other comprehensive income	27	30		-30	164
Other comprehensive income for the period,	237	-817		-1 474	-728
net after tax
Total comprehensive income for the period	963	-14		6 633	5 133
Profit for the period attributable to
Owners of the Parent	728	731		8 105	5 498
Non-controlling interests	-2	72		2	363
Total comprehensive income attributable to
Owners of the Parent	964	-68		6 636	4 773
Non-controlling interests	-1	54		-3	360
Earnings per share, SEK *	0.58	0.62	-6	6.51	4.63	+40

* No dilution effects during the period.

The Group

Q4

Balance sheet

MSEK	31 Dec 2012	31 Dec 2011	Change %
Intangible assets	11 423	11 807	-3
Property, plant and equipment	25 516	25 702	-1
Financial assets	6 265	6 835	-8
Inventories	25 508	26 077	-2
Current receivables	21 511	21 979	-2
Cash and cash equivalents	13 829	5 592	+147
Non-current assets classifi ed as held for sale	-	747	N/A
Total assets	104 052	98 739	+5
Total equity	36 232	33 891	+7
Non-current interest-bearing liabilities	34 505	27 125	+27
Non-current non-interest-bearing liabilities	6 516	6 487	-8
Current interest-bearing liabilities	2 698	5 948	-55
Current non-interest-bearing liabilities	24 101	25 180	-2
Liabilities associated with non-current assets classifi ed as held for sale	-	108	N/A
Total equity and liabilities	104 052	98 739	+5
Net working capital *	25 170	25 626	-2
Loans	34 794	30 455	+14
Net debt **	21 818	25 908	-16
Non-controlling interests in total equity	107	1 401	-92

* Inventories plus trade receivables excl. prepaid income taxes, reduced by non-interest-bearing liabilities excl. tax liabilities.

** Current and non-current interest-bearing liabilities including net provisions for pensions, less cash and cash equivalents.

Change in total equity

	Equity related to	Non-controlling	Total
MSEK	owners of the Parent	interest	equity
Opening equity, 1 January 2011	32 580	1 233	33 813
Total comprehensive income for the period	4 773	360	5 133
Personnel options program	67	-	67
Hedge of personnel options program	-1 353	-	-1 353
Acquisition of non-controlling interests	-18	56	38
Dividends	-3 559	-248	-3 807
Closing equity, 31 December 2011	32 490	1 401	33 891
Opening equity, 1 January 2012	32 490	1 401	33 891
Total comprehensive income for the period	6 636	-3	6 633
Issue of new equity / Acquisition of non-controlling interests	1 151	-1 286	-135
Personnel options program	86	-	86
Hedge of personnel options program	-161	-	-161
Dividends	-4 077	-5	-4 082
Closing equity, 31 December 2012	36 125	107	36 232

Q4

The Group

Cash fl ow statement

MSEK	Q4 2012	Q4 2011	Q1-4 2012	Q1-4 2011
Cash flow from operating activities
Income after financial income and expenses	+1 627	+1 140	+11 516	+8 179
Adjustment for depreciation, amortization and impairment losses	+1 329	+1 362	+4 322	+5 823
Adjustment for items that do not require the use of cash etc.	+390	+1 323	+251	+1 359
Income tax paid	-551	-689	-3 056	-2 587
Cash flow from operations before changes in working capital	+2 795	+3 136	+13 033	+12 774
Changes in working capital
Change in inventories	+1 378	-17	-382	-4 699
Change in operating receivables	+1 754	+212	+18	-2 598
Change in operating liabilities	-1 234	+70	-228	+2 567
Cash fl ow from changes in working capital	+1 898	+265	-592	-4 730
Investments in rental equipment	-205	-146	-663	-440
Divestments of rental equipment	+32	+57	+114	+160
Cash flow from operations	+4 520	+3 312	+11 892	+7 764
Cash flow from investing activities
Acquisitions of companies and shares, net of cash acquired	-27	-73	-39	-338
Acquisitions of property, plant and equipment	-1 565	-1 648	-4 820	-4 994
Proceeds from sale of property, plant and equipment	+108	+13	+928	+152
Cash flow from investing activities	-1 484	-1 708	-3 931	-5 180
Net cash flow after investing activities	+3 036	+1 604	+7 961	+2 584
Cash flow from financing activities
Change in interest-bearing debt	+1 618	+522	+4 571	+2 130
Dividends paid	-5	-3	-4 082	-3 807
Cash flow from financing activities	+1 613	+519	+489	-1 677
Cash flow for the period	+4 649	+2 123	+8 450	+907
Cash and cash equivalents at beginning of the period	+9 247	+3 508	+5 592	+4 783
Exchange-rate differences in cash and cash equivalents	-67	-39	-213	-98
Cash and cash equivalents at the end of the period	+13 829	+5 592	+13 829	+5 592

Key fi gures	Q4 2012	Q4 2011	Q1-4 2012
No. of shares outstanding at end of period('000) 1)	1 254 386	1 186 287	1 254 386
Average no. of shares('000) 1)	1 254 386	1 186 287	1 245 874
Tax rate, %	55.4	29.6	29.6
Return on capital employed, % 2)	19.8	16.0	19.8
Return on total equity, % 2)	23.0	17.3	23.0
Return on total capital, % 2)	13.7	11.1	13.7
Shareholders' equity per share, SEK	28.80	27.40	28.80
Net debt/equity ratio	0.6	0.8	0.6
Equity/assets ratio, %	35	34	35
Net working capital, %	27	26	27
Earnings per share, SEK	0.58	0.62	6.51
Cash flow from operations, MSEK	+4 520	+3 312	+11 892
Number of employees	48 742	50 030	48 742

1) No dilution effect during the period.

2) Rolling 12 months.

The Parent Company

Income statement

MSEK	Q4 2012	Q4 2011	Q1-4 2012	Q1-4 2011
Revenue	4 146	4 205	16 990	17 460
Cost of sales and services	-3 093	-4 104	-13 007	-15 207
Gross profit	1 053	101	3 983	2 253
Selling expenses	-210	-254	-633	-748
Administrative expenses	-776	-1 304	-2 821	-3 725
Research and development costs	-375	-338	-1 281	-1 150
Other operating income and expenses	24	115	269	616
Operating result	-284	-1 680	-483	-2 754
Income from shares in Group companies1)	3 068	1 710	11 769	2 815
Income from shares in associated companies	-5	-	0	10
Interest income and similar items	-	169	781	611
Interest expenses and similar items	-332	-253	-2 038	-1 679
Result after fi nancial items	2 447	-54	10 029	-997
Appropriations	6	-8	6	-8
Income tax expense1)	-221	323	-325	625
Result for the period1)	2 232	261	9 710	-380

Balance sheet

MSEK	31 Dec 2012	31 Dec 2011
Intangible assets	9	17
Property, plant and equipment	7 308	6 992
Financial assets	38 139	18 502
Inventories	3 809	4 023
Current receivables1)	17 073	15 699
Cash and cash equivalents	25	8
Total assets	66 363	45 241
Total equity1)	24 776	12 516
Untaxed reserves	3	10
Provisions	558	697
Non-current interest-bearing liabilities	22 046	16 072
Non-current non-interest-bearing liabilities	63	33
Current interest-bearing liabilities	12 858	9 032
Current non-interest-bearing liabilities	6 059	6 881
Total equity and liabilities	66 363	45 241
Pledged assets	-	-
Contingent liabilities	15 265	12 006
Interest-bearing liabilities and provisions minus cash and cash equivalents and	20 388	16 990
interest-bearing assets
Investments in fixed assets	1 338	1 421

1) Q4 2011 result of 877 million SEK has been adjusted with -616 million SEK to 261 million SEK. The adjustment is attributable to changed accounting principles for Group contributions.

Market overview, the Group

Order intake and invoiced sales per market area

Fourth quarter 2012

	Order intake		Change *	Share	Invoiced sales	Change *	Share
Market area	MSEK	%	%1)	%	MSEK	%	%
The Group
Europe	7 617	-11	-11	35	7 988	-8	34
North America	3 913	-5	-5	19	3 950	-5	16
South America	1 209	-32	-12	6	2 541	+27	10
Africa/Middle East	2 891	+65	+14	14	2 274	-6	9
Asia	3 771	-19	-19	18	4 856	+3	20
Australia	1 669	-34	-18	8	2 719	+13	11
Total	21 070	-10	-10	100	24 328	-0	100
Sandvik Mining
Europe	899	+17	+17	12	1 050	-3	11
North America	1 152	+12	+12	15	1 119	-8	11
South America	691	-36	+4	9	1 735	+36	18
Africa/Middle East	2 546	+76	+14	33	1 858	-6	19
Asia	1 135	-36	-36	15	1 913	+38	19
Australia	1 260	-40	-20	16	2 137	+8	22
Total	7 683	-5	-6	100	9 812	+10	100
Sandvik Machining Solutions
Europe	3 748	-1	-1	55	3 726	-3	54
North America	1 357	-3	-3	20	1 363	+1	20
South America	218	-15	-15	3	222	-17	3
Africa/Middle East	62	-18	-18	1	63	-15	1
Asia	1 393	-8	-8	20	1 421	-8	21
Australia	71	-5	-5	1	70	-8	1
Total	6 849	-4	-4	100	6 865	-4	100
Sandvik Materials Technology
Europe	1 620	-8	-8	49	1 629	-8	45
North America	804	-15	-15	24	948	+2	26
South America	65	-34	-34	2	72	-14	2
Africa/Middle East	42	-42	-42	1	52	-38	1
Asia	549	+16	+16	17	673	-14	19
Australia	232	-13	-13	7	246	+2	7
Total	3 312	-9	-9	100	3 620	-7	100
Sandvik Construction
Europe	618	-31	-31	34	801	-15	34
North America	291	-24	-24	16	182	-37	8
South America	173	-36	-36	10	413	+33	17
Africa/Middle East	214	+93	+93	12	263	+36	11
Asia	409	-27	-27	23	483	-20	20
Australia	88	+23	+23	5	240	+165	10
Total	1 793	-22	-22	100	2 382	-2	100
Sandvik Venture
Europe	731	-44	-44	51	774	-28	48
North America	308	-6	-6	22	335	-4	20
South America	62	-23	-23	4	100	+49	6
Africa/Middle East	28	-47	-47	2	38	-51	2
Asia	284	-13	-13	20	367	-6	22
Australia	18	-45	-45	1	25	-23	2
Total	1 431	-33	-33	100	1 639	-17	100

* At fixed exchange rates for comparable units.

1) Excluding major orders.

Q4

Order intake by business area

	Q4	Q1-4	Q1	Q2	Q3	Q4	Change Q4		Q1-4
MSEK	2011	2011	2012	2012	2012	2012	%	% 1)	2012
Sandvik Mining	8 284	35 619	11 793	10 315	8 499	7 683	-7	-5	38 289
Sandvik Machining Solutions	7 358	28 737	7 768	7 544	6 556	6 849	-7	-4	28 717
Sandvik Materials Technology	3 674	16 350	4 278	4 006	3 112	3 312	-10	-9	14 708
Sandvik Construction	2 330	9 898	2 622	2 488	2 110	1 793	-23	-22	9 013
Sandvik Venture	2 342	8 473	2 432	1 837	1 517	1 431	-39	-33	7 218
Group activities	2	1	1	0	1	2			3
Group total	23 990	99 078	28 894	26 190	21 795	21 070	-12	-10	97 948

Invoiced sales by business area

	Q4	Q1-4	Q1	Q2	Q3	Q4	Change Q4		Q1-4
MSEK	2011	2011	2012	2012	2012	2012	%	% 1)	2012
Sandvik Mining	9 105	32 232	8 639	9 826	9 485	9 812	+8	+10	37 762
Sandvik Machining Solutions	7 364	28 171	7 618	7 431	6 567	6 865	-7	-4	28 482
Sandvik Materials Technology	3 940	16 339	4 100	4 195	3 450	3 620	-8	-7	15 366
Sandvik Construction	2 484	9 249	2 453	2 592	2 256	2 382	-4	-2	9 683
Sandvik Venture	2 202	8 056	2 015	1 884	1 655	1 639	-26	-17	7 194
Group activities	9	37	13	11	11	10			42
Group total	25 104	94 084	24 838	25 939	23 424	24 328	-3	0	98 529

Operating profi t by business area

	Q4	Q1-4	Q1	Q2	Q3	Q4	Change Q4	Q1-4
MSEK	2011	2011	2012	2012	2012	2012	%	2012
Sandvik Mining	1 220	5 189	1 494	1 800	1 506	1 203	-1	6 004
Sandvik Machining Solutions	1 549	6 347	1 875	1 827	1 313	1 240	-20	6 256
Sandvik Materials Technology	-896	-642	349	415	180	-351	-61	592
Sandvik Construction	-255	58	213	222	230	83	N/A	748
Sandvik Venture	316	-21	355	341	283	260	-18	1 238
Group activities	-285	-783	-467	-393	-187	-301		-1 348
Group total 2)	1 649	10 148	3 819	4 212	3 325	2 134	+29	13 490

Operating margin by business area

	Q4	Q1-4	Q1	Q2	Q3	Q4	Q1-4
MSEK	2011	2011	2012	2012	2012	2012	2012
Sandvik Mining	13.4	16.1	17.3	18.3	15.9	12.3	15.9
Sandvik Machining Solutions	21.0	22.5	24.6	24.6	20.0	18.1	22.0
Sandvik Materials Technology	-22.7	-3.9	8.5	9.9	5.2	-9.7	3.9
Sandvik Construction	-10.3	0.6	8.7	8.6	10.2	3.5	7.7
Sandvik Venture	14.3	-0.3	17.6	18.1	17.1	15.9	17.2
Group total	6.6	10.8	15.4	16.2	14.2	8.8	13.7

1) Change compared with preceding year at fixed exchange rates for comparable units.

2) Internal transactions had negligible effect on business area profits.

Accounting policies

This interim report was prepared in accordance with IFRS, applying IAS 34, Interim Financial Reporting. The same accounting and valuation policies were applied as in the most recent annual report with the exception of new and revised standards and interpretations effective from 1 January 2012. These changes have not had any impact on Sandvik's financial statements.

The revised IAS 19, Employee Benefits, will be applied from 1 January 2013. The amendment eliminates the option of deferring actuarial gains and losses under the corridor method. Consequently, Sandvik's net pension liability recognized in the balance sheet will increase by about 5 billion SEK.

Equity will decrease by about 3.5 billion SEK.

The interim report for the Parent Company has been prepared in accordance with the Annual Accounts Act and the Securities Market Act, which is in line with standard RFR 2 Reporting by a legal entity, issued by the Swedish Financial Reporting Board.

Transactions with related parties

No transactions between Sandvik and related parties that have significantly affected the company's position and results took place.

Risk assessment

Sandvik is a global group represented in 130 countries and as such is exposed to a number of commercial and financial risks. Accordingly, risk management is an important process for Sandvik in its work to achieve established targets. Efficient risk management forms part of the ongoing review of operations and forward-looking assessment of operations. Sandvik's long-term risk exposure is assumed not to deviate from the inherent exposure associated with Sandvik's ongoing business operations. For a more in-depth analysis of risks, refer to Sandvik's Annual Report for 2011.

Cautionary statement

Some statements herein are forward-looking and the actual outcome could be materially different. In addition to the factors explicitly commented upon, the actual outcome could be materially affected by other factors, for example the effect of economic conditions, exchange-rate and interest-rate movements, political risks, impact of competing products and their pricing, product development, commercialisation and technological difficulties, supply disturbances, and the major customer credit losses.

Stockholm, 29 January 2013 Sandvik Aktiebolag (publ)

The Board of Directors

Sandvik AB discloses the information provided herein pursuant to the Securities Markets Act and/or the Financial Instruments Trading Act. The information is submitted for publication on 29 January 2013 at 8:00 CET. The Q1 2013 report will be published on 23 April 2013. The company´s auditors have not conducted a special review of the Q4 report 2012.

Additional information may be obtained from Sandvik Investor Relations, at tel +46 8 456 12 40 (Magnus Larsson) or tel +46 8 456 12 30 (Oskar Lindberg) or by e-mailing info.ir@sandvik.com. A presentation and teleconference will be

Sandvik AB, Corp. Reg. No.: 556000-3468 Box 510 SE-101 30 Stockholm +46 8 456 11 00

held on 29 January 2013 at 14:00 CET at the World Trade Center in Stockholm. Information is available at www.sandvik.com/ir.

Calendar:

23 Apr First-quarter report 2013
-------------------------------------	--

• 25 Apr Annual General Meeting in Sandviken, Sweden
• 19 Jul Second-quarter report 2013
• 24 Sep Capital Markets Day in Sandviken, Sweden
• 24 Oct Third-quarter report 2013