Sandvik Earnings: Operating Profit Falls 14%; Restructuring Measures Set to Restore Profitability

Narrow-moat Sandvik reported a 14% decline in its adjusted operating profit during the first quarter. Lower volumes, against a high comparable, were the main reason for the fall in profitability, which saw its adjusted EBITA margin decrease 160 basis points to 18.2%. We aren’t overly concerned by the drop in profitability as we believe it has several measures in place such as cost-saving initiatives and secular growth in its mining division, which we anticipate will help Sandvik return to its EBITA margin target of between 20% and 22%. We maintain our SEK 210 fair value estimate and view shares as fairly valued