Company Reports

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

The short-cycle nature of demand for Sandvik’s metal-cutting tools and mining equipment exposes the group to cyclical swings in industrial manufacturing and commodity prices. A combination of divestments and continuous focus on ways to improve operational efficiency has successfully created a more resilient and profitable business. However, restructuring programs are frequently required to protect profitability once macroeconomic conditions change.

Narrow-moat Sandvik managed to protect its operating margins in a challenging economy, thanks to its pricing power on industrial equipment and tight cost controls. Operating profit grew by 11% in fiscal 2023, largely in line with its 13% revenue growth, which broadly met our expectations. Shares are trading slightly higher and remain fairly valued to our SEK 200 fair value estimate, which we maintain.

Narrow-moat Sandvik reported a 7% decline in organic order intake during the third quarter, its largest decline since fourth-quarter 2020, explained by the short-cycle nature of demand for its products and services, which are exposed to cyclical swings in the economy. Organic revenue grew 1% year over year, supported by the execution of its healthy order backlog for mining equipment and aftermarket services, which was largely offset by its short-cycle machining segment. The daily order intake in the machining segment during the first two weeks of the fourth quarter remained consistent with the third quarter, and thus there appears to be no sign of a significant deterioration in the macroeconomic environment. Shares are currently trading at a slight discount to our SEK 200, which we maintain.

Narrow-moat Sandvik delivered a notable second quarter, which shows the group is outperforming its closest competitor Epiroc, who reported earnings yesterday. We are most impressed with Sandvik’s better-than-expected 120-basis-point EBIT margin progression to 18.9%, which has led us to raise our margin estimates, and subsequently increase our fair value estimate to SEK 200 from SEK 193. We anticipate Sandvik will be able to maintain its current EBIT margin, supported by robust demand for higher-margin aftermarket mining services. We view shares as fairly valued.

The short-cycle nature of demand for Sandvik’s metal-cutting tools and mining equipment exposes the group to cyclical swings in industrial manufacturing and commodity prices. A combination of divestments and restructuring has successfully created a more resilient and profitable business. The distribution of the materials technology segment to shareholders in the second half of 2022 has further reduced cyclicality due to the segment’s large concentration to energy-producing customers.

Narrow-moat Sandvik reported organic order growth of 2% despite growing concerns over the health of the economy. Order intake of EUR 34.4 billion during the first quarter included two significant orders for battery mining equipment, which continues to be a structural tailwind for Sandvik and will help reduce the group's cyclicality to an economic downturn. The group's short-cycle machining segment reported organic order growth of 5%, driven by double-digit growth from aerospace and energy customers. We maintain SEK 193 fair value estimate and view shares as fairly valued.

Narrow-moat Sandvik delivered impressive full-year results, reporting organic order and revenue growth (excluding its divestment from Russia) of 9% and 12%, respectively. Fourth-quarter performance was also solid, as well as the first few trading weeks of 2023, which will help alleviate investor concerns (at least for the time being) about the general health of the economy and its impact on the short-cycle nature of Sandvik’s business. Organic order intake grew 2% during the fourth quarter, despite a slowdown in demand for mining and construction equipment, with strong demand for mining aftermarket services and manufacturing activity in North America remaining robust. We reiterate our SEK 193 fair value estimate and view shares as fairly valued.

The short-cycle nature of demand for Sandvik’s metal-cutting tools and mining equipment exposes the group to cyclical swings in industrial manufacturing and commodity prices. A combination of divestments and restructuring has successfully created a more resilient and profitable business. The distribution of the materials technology segment to shareholders in the second half of 2022 will further reduce cyclicality due to the segment’s large concentration to energy-producing customers.

Narrow-moat Sandvik’s impressive third-quarter results, which saw organic order intake grow 8%, will help alleviate investors' concerns (at least for the time being) about the general health of the global economy and its expected negative impact on the short-cycle nature of Sandvik’s business. The easing of supply chain challenges helped contribute to 13% organic revenue growth, which was further boosted by acquisitions and favorable currency movements resulting in 35% growth in reported revenue. Adjusted operating profits grew 30%, a slower pace than revenue, due to price increases on new orders not fully reflected this quarter and margin dilution from acquisitions. We maintain our SEK 193 fair value estimate and view shares as fairly valued.

Narrow-moat Sandvik managed to report decent second-quarter results despite growing concerns about an impeding recession from investors and the subsequent impact on the short-cycle nature of Sandvik’s business. Sandvik’s decision to pause and subsequently wind down its business in Russia had a significant impact on its second-quarter results. However, underlying demand remains healthy. Organic order intake and revenue grew by 4% and 6%, respectively but both order intake and revenues grew organically by 10% if we exclude Russia. Second-quarter revenue growth of 25% includes a 19% contribution from acquisitions. Adjusted operating profit growth of 23% grew at a slower rate than revenue due to a combination of cost inflation and a shift to more expensive air freight in order to service customers, as well as the impact of lower-margin acquisitions. Performance is broadly tracking in line with our expectations and thus we reiterate our SEK 193 fair value estimate and view shares as fairly valued.

The short-cycle nature of demand for Sandvik’s metal-cutting tools and mining equipment exposes the group to cyclical swings in industrial manufacturing and commodity prices. A combination of divestments and restructuring has successfully created a more resilient and profitable business. The distribution of the materials technology segment to shareholders in the second half of 2022 will further reduce cyclicality due to the segment’s large concentration to energy-producing customers.

We expect to moderately raise our SEK 193 fair value estimate for narrow-moat Sandvik following a strong start to the year. There were a number of moving parts behind first-quarter revenue growth of 35% and operating profit growth of 23%, due to the proposed distribution and listing of the materials technology segment and a significant contribution from 14 prior-year acquisitions. Nevertheless, the core operations of the group remain robust, delivering organic order intake and organic revenue growth of 13% and 9%, respectively. We view shares as fairly valued.

Narrow-moat Sandvik delivered a decent set of fourth-quarter results, which topped our top-line expectations due to a SEK 2.9 billion contribution from acquisitions. Full-year revenue growth of 15% includes a 6% contribution from acquisitions, which was largely offset by unfavorable currency movements. Sequential order intake growth in the fourth quarter combined with management noting a continuing positive trajectory in January gives us reason to believe there are still legs to the economic recovery. We maintain our SEK 193 fair value estimate and view shares as fairly valued.

The short-cycle nature of demand for Sandvik’s metal-cutting tools and mining equipment exposes the group to cyclical swings in industrial manufacturing and commodity prices. A combination of divestments and restructuring, under the previous CEO, has successfully created a more resilient and profitable business, evidenced by Sandvik’s healthy 16% operating margin on depressed sales volumes in 2020. We believe this has set a good platform for the group’s strategy shift toward growth opportunities, with 2020 revenue falling below 2017 levels and certain segments facing structural headwinds.

Narrow-moat Sandvik’s results are tracking in line with our full-year expectations. A cyclical recovery across all operating segments was the main contributor behind organic third-quarter revenue and order growth of 13% and 21%, respectively. Longer lead times for Sandvik’s faster-growing mining equipment and supply chain bottlenecks explain the mismatch between revenue and order growth. Acquisitions added a further 10% to revenue growth, but had a dilutive impact on margins. We maintain our SEK 193 fair value estimate and view shares as fairly valued.

Narrow-moat Sandvik has benefited from a recovery in global industrial production and high commodity prices, which has favored its short and long-cycle businesses. Second-quarter organic sales growth of 22% and 11% year to date is tracking in line with our full-year expectations and thus we maintain our SEK 193 fair value estimate. Shares are currently fairly valued.

Narrow-moat Sandvik’s exposure to cyclical end markets with low visibility leads to volatile swings in demand. In first-quarter 2021 this was favorable, buoyed by high commodity prices leading to a record order intake level for the mining segments. We are raising our fair value estimate to SEK 193 from SEK 158 per share, which is driven by a reduction in our weighted average cost of capital due to divestments and restructuring that have lowered the systematic risk of Sandvik, rather than a material change in our forecasts. Shares remain richly valued and are currently trading at an all-time high.

The short-cycle nature of demand for Sandvik’s metal-cutting tools and mining equipment exposes the group to cyclical swings in industrial manufacturing and commodity prices. A combination of divestments and restructuring, under the previous CEO, has successfully created a more resilient and profitable business, evidenced by Sandvik’s healthy 16% operating margin on depressed sales volumes in 2020. We believe this has set a good platform for the group’s strategy shift toward growth opportunities, with 2020 revenue falling below 2017 levels and certain segments facing structural headwinds.

Having now created a more decentralized and profitable business than it did during previous economic downturns, Sandvik is now looking to shift its focus toward growth opportunities. The company is maintaining its 5% sales growth target through the cycle, which includes a contribution of approximately 2.5% from acquisitions. We expect some growth areas highlighted at the Capital Markets Day to be met with greater competition and thus lower margins than some of Sandvik’s high-margin-generating core businesses.