Sandvik sets a new strategic direction to strengthen market leadership

Sandvik sets a new strategic direction to strengthen market leadership

The purpose of the new strategy is to achieve world class performance in
value creation through higher growth and profitability and thereby make
Sandvik an even more attractive company for customers, employees and
shareholders. The new strategy is focused on increasing profitability,
strengthening position in attractive markets and segments and a more
active portfolio management. The strategy is based on four
cornerstones:  

  · AMBITION to be world class in every core area,
  · higher SPEED in every process,
  · increased FOCUS in selected core businesses,
  · become truly GLOBAL in mindset and organization but with strong
LOCAL adaptations.

To succeed with the new strategic direction and to increase transparency
and operational focus the organization will be split in five Business
Areas instead of three and a stronger platform for utilizing common
resources will be developed. The new organization will be effective 1
January 2012.

The strategy entails a stronger and more enhanced focus on growth in
strategically important, fast growing and profitable markets.
Furthermore the strategy aims to shorten decision making in order to
faster adapt to changing market conditions. Capital allocation will be
more strictly directed towards areas of high returns and value creation.
A new model for performance management will be implemented to secure
continued improvements. Alternative structural solutions will be
evaluated on a regular basis for units that are of lower strategic
importance or do not reach acceptable returns.

The Sandvik business model is founded on unique knowledge in excavation,
development and shaping of metals and other materials. The new
organization will ensure better pre-conditions for every core business
to develop and optimize product offering as well as production,
distribution and market channels. The new leaner and more simplified
organizational structure together with better coordination of common
functions in Shared Service Centers is expected to generate cost savings
and increased quality.

“Sandvik has a strong offering and a market leading position in many
fast-growing and developing markets as well as in more mature markets.
We need to strengthen this position and also improve in some areas to be
world class in all our businesses. Sandvik will always have ambitious
targets but there also has to be strong commitment to reaching these
targets. We need to act as one company and make sure that we allocate
resources and capital to the businesses where we get the best return,
says Olof Faxander, Sandvik's President and CEO.

“It is essential that we adopt strategies and organization to a rapidly
changing global market where the ability to act and react fast is
crucial for long term success. The new organization means a clear and
strong focus on four core Business Areas where our targets are both
market leadership and world-class profitability. We also need to enable
development of adjacent businesses and in the fifth Business Area ensure
that smaller operations with high potential have the opportunity to
develop in the best way”.

Three Business Areas turn into five

In order to create maximum leverage within each core business and to
optimize the organization for growth and profitability also for new and
smaller adjacent businesses the operation will be organized in the
following five Business Areas.

Sandvik Mining
Focused on global leadership on products, solutions and services for
high-performing hard rock and soft rock underground and surface mining
operations. The medium term targets are:

  · to maintain the strong growth rate
  · to maintain and strengthen a leading market position
  · to increase profitability relative to key peers

Sandvik Machining Solutions
Holds a clear global leadership by offering productivity enhancing
products and solutions for advanced industrial metal cutting. The medium
term targets are:

  · to further strengthen the global leadership
  · to increase growth and profitability
  · to evaluate opportunities to expand in adjacent areas

Sandvik Materials Technology
Offers high value-added advanced metal products for demanding
applications in selected niches. The medium term targets are:

  · to within 2-3 years turn around the Business Area to a significantly
higher profitability
  · subsequently evaluate alternatives for growth and expansion

Product Area Process Systems and the parts of Product Area MedTech
comprising medical devices (implants and instruments) will be moved to
the new Business Area Sandvik Venture.

Unless a credible path to acceptable profitability is visible in the
medium term the Business Area Sandvik Materials Technology will be
evaluated for full or partial divestment.

Sandvik Construction
Offers high-performing products, solutions and services within selected
niches of the global construction industry. The medium term targets are:

  · to within 2-3 years turn around the Business Area to a significantly
higher profitability
  · subsequently evaluate different alternatives for growth and
expansion

Unless a credible path to acceptable profitability is visible in the
medium term the Business Area will be evaluated for full or partial
divestment.

Sandvik Venture
A Business Area aiming to create the best possible environment for
growth and profitability in attractive and fast-growing operations.
Primarily focusing on Product Areas with limited connections to other
Business Areas or closely linked to several other Business Areas.

The different Product Areas within Sandvik Venture will be evaluated on
a regular basis from structural, strategic and value creation aspects.
The following Product Areas will be included in Sandvik Venture: Sandvik
Process Systems, Sandvik Hard Materials, Diamond Innovations, Wolfram
and Dormer as well as the parts of Sandvik MedTech comprising medical
devices.

Preliminary pro forma calculation

Based on the actual numbers for the full year 2010 and the second
quarter of 2011 some preliminary financial key figures are as follows:

Full year 2010 (rounded numbers)

                 SandvikMining  SandvikMachining Solutions 
SandvikMaterials Technology  SandvikConstruction  SandvikVenture
Invoicing, MSEK  27,200         18,500                      15,700      
                8,000                7,300
EBIT, MSEK       4,100          3,800                       1,300       
                600                  800
EBIT %           15%            20%                         8%          
                8%                   11%
ROCE %           32%            25%                         9%          
                13%                  9%
No of employees  12,800         12,600                      8,000       
                2,600                3,800

Q2 2011 (rounded numbers)

                 SandvikMining  SandvikMachining Solutions 
SandvikMaterials Technology  SandvikConstruction  SandvikVenture
Invoicing, MSEK  7,600          5,300                       4,500       
                2,200                2,100
EBIT, MSEK       1,300          1,400                       400         
                100                  250
EBIT %           17%            26%                         8%          
                5%                   12%
ROCE %           35%            31%                         10%         
                11%                  13%
No of employees  13,600         13,000                      8,200       
                2,700                3,900

A final calculation of financial numbers according to the new
organization will be conducted in connection with the full year closing
of 2011.

Potential one off costs resulting from the implementation of the new
organization and strategy will be communicated once they are finally
assessed and the objective is to take the charges during the rest of
2011.

Coming activities

The new organization will be effective 1 January 2012. Key activities to
prepare for this will include manning of the different Business Areas,
development of detailed targets and strategies as well as activities
aimed at coordinating and separating different units.

In line with the new strategic direction and due to limited strategic
fit as well as poor financial results a process has been initiated to
divest the parts of Sandvik MedTech comprising implants and instruments.
The operation had in 2010 sales of around 650 MSEK and about 600
employees. As a consequence the result in Q3 is expected to be impacted
by costs of approximately 1.2 billion SEK from write-downs of goodwill
in this operation.

A conference call with Sandvik's CEO Olof Faxander and CFO Ola Salmén
about the new strategy and organization will be held on the 2 September
at 14.00 CET.
To participate in the conference call please call +46 8 506 269 00 and
enter PIN CODE 881751#.

Sandviken, 2 September 2011
Sandvik Aktiebolag (publ)

Sandvik AB discloses the information provided herein pursuant to the
Securities Markets Act and/or the Financial Instruments Trading Act. The
information was submitted for publication at 08:30 CET on 2 September
2011.

For further information, contact Anders Wallin, Vice President Group
Communication,+46 26 26 09 20 or Jan Lissåker, Vice President Investor
Relations, Sandvik AB, +46 26 26 10 23.