Sandvik AB (publ)

Hello, everyone, and a warm welcome to Sandvik's presentation of the fourth quarter results 2024. My name is Louise Tjeder, Head of Investor Relations here at Sandvik. And with me, of course, I have our CEO Stefan Widing and CFO Cecilia Felton. We will start this webcast with a presentation. Stefan and Cecilia will take you through the highlights of this quarter. And after that, we will move on to the Q&A session. With this, I hand over the word to you, Stefan.

Thank you, Louise. And also from my side, a warm welcome to the fourth quarter report of 2024. To summarize the quarter, we continue to see good momentum in the mining business. We also have a strong order intake growth in infrastructure, while a challenging industrial activity led to subdued demand, particularly in Europe and the automotive segment. Total order intake increased by 5%, and of that, organic growth was 4%. Revenues increased by 1% and organically by a positive zero. We have overall a stable financial performance in the quarter. Adjusted EBITDA improved by 1%. This corresponds to a margin of 19.6% versus 19.5% in the previous year. A rolling 12 months, we are at 19.2% versus 20% a year ago. The savings from our restructuring programs are yielding good results in the quarter. Total savings of 419 million with a bridge effect of 324 million. Adjusted profit for the period 4.1 versus 4.0 last year and a strong free operating cash flow of 6.5 billion versus 5.5 last year. We also continue to execute on our strategic priorities, one of them being to grow in the surface mining business. And here we saw an important deal in Peru this quarter, which was for both rotary drill rigs and surface boom drills. It didn't quite make it to the threshold of a major order, but it was close and most importantly, a very strategic win in terms of penetrating the surface market in Peru. We also see a strong momentum in our screening business. I'll come back to that. And also, we are very happy to see that the recent acquisition we did of Shusho Anno, which is an important player in the local premium market in China, showed good growth in the quarter with high single-digit growth. This is, of course, still reported in the structure column, not organic, just to be clear on that. The innovation of the quarter we want to highlight is our upgraded large 800 series cone crusher with new automation features. This crusher enables us not only to crush higher volumes but more importantly to crush to finer particles. This is a key initiative to ensure that you can crush more and grind less. This is good not only in saving costs for our customers, it reduces also the energy consumption substantially. And this is one of our key strategic growth initiatives in the crushing division. Looking then at the year-over-year market development, if we start just with a geographical view, Europe minus 2, but weak cutting tool markets down around 10%. North America up 5%, a little bit better, but still declining on cutting tool size with a negative mid-single-digit performance. Asia, minus six. Here, China cutting tools organically was negative high single digits, while then Susuano grew high single digits in the structure column. The remaining markets are related to mining, and they are all growing double digits. We continue to show mining as stable at a high level. We see very strong momentum in the aftermarket business, as we have said. Also now good momentum, I would say, recovering a bit on the equipment side. We'll come back to more details there. General engineering, however, weak, driven in particular by Europe. Overall, general engineering is down high single digits. Europe is down low double digits. North America a bit better also here with mid single digit decline, while China is also better with just a slight decline in general engineering. Infrastructure, stable. The main change here, I would say, is that we now see early signs of an improved sentiment in North America, which we want to highlight. We also had some larger orders in the quarter, so overall a solid order intake, although on low compares in the infrastructure segment in the quarter. Automotive is the main weakness in the quarter, overall down low double digits, driven by Europe, down low double digits, especially then out of the key auto markets in Europe, especially Germany and Italy. North America doing a bit better down mid-single, China down double digits, but better if we include Sosoano overall. Aerospace continued strong momentum with improvements, however, still down slightly overall, driven by a weak performance in North America, which was down high, low double digits. But this was driven by the strike at Boeing. Production resumed in December, so it became more or less a lost quarter. We have good hopes for momentum to come back now in North America in 2025. In Europe, aerospace was positive, up mid-single digits, and also Asia was down, but in China it was up low single digits. The other segments also negative, down mid-single digits overall. Europe down mid-single, North America down high single, and Asia or China then down. also slightly down but Asia overall a bit more stable. So that summarizes the overall market view from an industrial point of view and mining. This then concludes into an order intake of about 31.5 billion, revenues 32.15%. Book-to-bill slightly below 100%, which is normal in this season. We are still encouraged by the order intake, which bodes positively going into this year. We can see here that we now have had positive organic order intake three quarters in a row, which of course is positive as we enter the new year. Revenue has been basically flattish now for the full year. So here we have more work to do to improve the sales. EBITDA, positive 1%, as we said, margin 19.6, slight improvement versus prior year, in absolute terms about 6.3 billion. Good performance here, lower volumes were offset by good price realisation, good cost control and execution of our structure savings. We also in this have managed to offset both currency dilution and slight dilution from our acquisitions. And as I said, rolling 12 months 19.2. Going into the business areas, mining and rock solutions, solid demand, positive momentum in the aftermarket with double digit growth. Equipment orders were stable year on year, but since we did not book any major orders, if we exclude major orders, equipment orders were up 26% and the business area in total was up 15%. We should say that, of course, the definition of a major order is arbitrary at 200 million. In this quarter, we had maybe more orders coming in just below that, but we still believe this shows a good underlying momentum and a little bit of a catch-up from a slightly weaker Q3. Some more positive sentiment, I would say, in the market now. Total order intake increased by 5%, of which organic was 6%. Then, of course, very strong margin, 21.5% up from 20.6%. Here we have, of course, volume growth, but then on top of that, good pricing offsetting inflation and then positive impact from the savings. Here we had a neutral impact from exchange rates. We have taken some important orders in the quarter, even though they were not classified as major. I already mentioned the one in Peru. We also have an important order in Chile, which is overall a major order, but we have only booked 60 million in the quarter. But it's an automation order and load and haul order that's been very important to catch. We also completed the acquisition of universal field robots which as you know will strengthen our automation offering further. Rock processing, here we had good underlying demand in mining which remained stable as well and then as we said an improved sentiment in infrastructure in particular than in the US. We also have seen inventory levels coming down a bit in Europe, but that has not translated to improved business climate as of now. Total order intake increased by 22%, and of that organic was also 22%, so strong performance. We had some major orders, but that we also had last year, so also including major orders, we increased by 23%. But overall, we should say it was a low compare. So that is part of the reason for the high order growth in the quarter. Just the moderate expectations a little bit going forward. Margin came in on the weaker side with 14.6% versus 15.7%. Here we do see some price pressure from infrastructure, especially with dealers, due to the fact that the market is still tough, even though we see some improved sentiment. We also had an inventory obsolescence provision that impacted the margins negatively in the quarter. Savings are coming through from savings initiatives here as well, but then also here a slightly negative impact from currency of 30 basis points. I already mentioned the large crusher. We actually saw a doubling of the order intake for this product category in the year, which is encouraging. And also very good performance from our screening business. The majority of this comes from the acquisition of Schenck that we did two years ago. During this period, they have delivered strong growth, strong margins, and also good synergy realizations with our crushing division. So overall, very strong performance from this new screening solutions division, which we are very happy to see in rock processing. Manufacturing and machining solutions, finally, as we said, weaker demand in cutting tools, particularly driven by Europe and automotive. We had solid order intake in the powder business at solid high double digits. Also this partly driven by weak comps. And I also mentioned that the local premium segment in China grew high single digits, which is encouraging. Software demand was mixed. It was solid in the US, but we were negatively impacted, especially by automotive in Europe, where the demand has been muted. Total order intake still grew by 1%, but organic decline was 3%. If we look at the beginning of this year, we see a stable demand situation if we take into account normal seasonality. Margin came in at 19.4 versus 20.2. I think we should highlight here that organically they fully offset the volume decline. So good price realisation, strong cost control and execution of the restructuring initiatives fully offset the volume decline in Q4. Then we had a negative impact from currency and a dilution from structure of 40 basis points and that overall then took down the margin. This delusion from structure, a material part of that is from the fact that we have, together with Susano, invested in a new greenfield in such factory in China that was brought online beginning of the quarter, but it still just began to ramp up. So right now we have all the costs, but very little revenue coming out of that factory. But it's an important growth initiative for us in China, both from a growth perspective and from a regionalization perspective. And that will take some quarters for that to ramp up. Then we also completed the acquisition of a CAM reseller for Mastercam in the quarter. So with that, I'll come back for conclusions and Q&A. But now I hand over to Cecilia.

Thank you, Stefan. All right. So let's take a closer look at the numbers then together. And as usual, we start with the growth bridge here on the right hand side. And there you can see that organically orders increased by 4% while revenues were flat. Structure contributed with 2% on order intake and 1% on revenue whilst currency was neutral. And that brought total order intake growth to 5% and total revenue growth to 1%. As Stefan mentioned, both adjusted EBITDA and the margin improved slightly year over year, so very pleased to see that. Net financial items came down year over year, mainly driven by a lower interest net. Tax rate, excluding items affecting comparability and also on a normalized basis, was 24%, so right in the middle of our guided range. Networking capital on a 12-month rolling basis was 29.9%. And we had a very strong cash flow in the quarter, 6.5 billion, corresponding to a cash conversion of 109%. Returns at 13.4% and 14.8% excluding PPA. And adjusted EPS improved slightly, as you can see in the table, to 3.25 sec. If we then continue with the EBITDA bridge and starting with the organic column, here you can see that revenues improved or grew by 49 million and EBITDA by 115 million. And that gives a very high positive leverage of above 200%, but as you can see, calculated on very small numbers here. Nevertheless, an accretion to the margin of 0.3 percentage points, whilst currency and structure were slightly dilutive. And that brings us from a margin of 19.5% last year to 19.6% this year. Both of our restructuring programs are being delivered according to plan. As you can see here now for the 22 program, we have realized 90% of the annualized run rate savings by the end of the year. And for the 24 program, we are now at 78%. If we then continue down in the P&L, looking at the finance net, you can see it came down from 630 million last year to 364 million this year. And this is mainly driven by a lower interest net. And that's the result of both lower borrowed volumes. And also you can see here at the bottom of the table, a lower yield cost. Tax rate on a reported basis was 20.1%. But then, as I said, excluding items affecting comparability and also on a normalized basis, it was 24%. So right in the middle of the guided range. If we then continue with the balance sheet, you can see here in the graph on the left-hand side that 12 months rolling net working capital came in at 20.9%. If you look at the dotted line, though, you can see that in the quarter, relative net working capital was 28.4%, and this is 0.9 percentage points lower than last year. Then if you look at the bars, you can see the development throughout the year. It looks fairly flat. However, in terms of volume, we worked very hard with improving our inventory levels and they came down by 1.2 billion. But that's more than offset by a negative currency impact and also some structure. Cash flow, as I said, very strong in the quarter, 6.5 billion, with a cash conversion of 109%. And on a 12-month rolling basis, it was 95%. And then looking at the year-over-year development, you can see that earnings adjusted for known cash improved. CapEx was a little bit lower, and networking capital was a little bit better. Then financial net debt came down sequentially to 32 billion, driven by the positive cash flow. And both the pension liability and capitalized leases were largely unchanged. Sorry. And this brought net debt down to 41 billion and financial net debt to EBITDA to 1.2 billion. Then if you look at outcome versus guidance, currency came in at 71 million, capex for the year 4.8, normalized tax rate 24%, and the interest net 1.5. Looking ahead then at Q1 and the full year for 2025, the estimated currency effect is 300 million for the first quarter. CapEx guidance for 2025 is around 5 billion, whilst the interest net we expect to come down to 0.8 billion. And the tax rate, we've left the guidance unchanged at 23 to 25%. And with that, I will hand over to you, Stefan.