SANDVIK MACHINING SOLUTIONS CAPITAL MARKETS DAY 2017

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1 SANDVIK MACHINING SOLUTIONS CAPITAL MARKETS DAY 2017

2 KLAS FORSSTRÖM PRESIDENT SANDVIK MACHINING SOLUTIONS Master of Science in Materials Physics and a MBA in international business from Uppsala University, Sweden. President Sandvik Coromant President Sandvik Hard Materials President Precision Twist Drills and Dormer NA Sr positions in Sales, R&D, Marketing and Business Development 4

3 FREDRIK VEJGÅRDEN HEAD OF STRATEGY & BUSINESS DEVELOPMENT Master of Science in Industrial Management and Engineering from the Institute of Technology at Linköping University, Sweden. McKinsey & Company 10 years at Luvata - Sr VP Operational Excellence (London, UK) - Head of Luvata HTS Asia (Shanghai, China) - Head of Luvata HTS Americas (Memphis, USA) 5

4 ADDITIVE MANUFACTURING POWDER & BLANKS TECHNOLOGY CENTER OF DIGITAL EXCELLENCE 6

5 55% 18% 12% 7% INSERTS ROUND TOOLS TOOLS TOOLING SYSTEMS POWDER & BLANKS ADDITIVE MANUFACTURING DIGITAL 7 Revenues YTD 2017

6 AUTOMOTIVE AEROSPACE OIL & GAS GENERAL ENGINEERING 14% 9% 30% 47% 8 Sandvik Annual Report 2016

7 NORTH AMERICA EUROPE ASIA 21% 20% 55% 9 Orders received 2016

8 DIRECT CUSTOMERS 85% 15% STANDARD VS. SPECIAL 60% 40% 30% 70% DIRECT VS. DISTRIBUTION MANUAL VS. WEB ORDER 10

9 CURRENT PERFORMANCE 11

10 SANDVIK MACHINING SOLUTIONS Q3 STRONG UNDERLYING GROWTH EARNINGS AND MARGIN IMPROVEMENT MSEK Q Q CHANGE ORDER INTAKE %* REVENUES %* OPERATING PROFIT % % OF REVENUES 21.0% 23.0% MSEK Q1-Q Q1-Q CHANGE ORDER INTAKE %* REVENUES %* OPERATING PROFIT % % OF REVENUES 21.0% 23.2% *At fixed exchange rates for comparable units *At fixed exchange rates for comparable units 12 SANDVIK: Interim Report on the third quarter 2017 Comments and numbers refer to continuing operations unless otherwise stated

11 35,0% 33,0% 31,0% 29,0% 27,0% 25,0% ROCE 23,0% 21,0% 19,0% 17,0% 15,0% 13

12 EBIT MARGIN % 23% 22% 21% 20% 19% 18% ROCE % 16% 15% 14

13 EBIT MARGIN 1,50 ROCE 1,45 1,40 1,35 CAPITAL TURNOVER 1,30 1,25 15

14 EBIT MARGIN REVENUE +10% P/V Q3 COST/ PRODUCTIVITY -10% FTE IN 3 YRS ROCE CAPITAL TURNOVER NET WORKING CAPITAL RATIO -5% PPTS CAPEX vs DEP N -10%

15 KEY MARKET TRENDS & STRATEGIC DIRECTION 17

16 GLOBAL MANUFACTURING GROWTH SUPER- CYCLE FINANCIAL CRISIS AND REBOUND CURRENT MARKET ENVIRONMENT 2013» 18

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18 Core Adjacent 20

19 TRENDS Core Round Tools gaining share Electrical Vehicles a long term trend Increase in complex material & components 21

20 TRENDS Core Round Tools gaining share Electrical Vehicles a long term trend Increase in complex material & components INDEXABLE ROUND TOOLS SC 22

21 TRENDS Core Round Tools gaining share Electrical Vehicles a long term trend Increase in complex material & components COMBUSTION HYBRID ELECTRICAL 23 NOW 5-10 YEARS OUT 30+ YEARS OUT Source: Morgan Stanley No OF INSERTS

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23 Core TRENDS Round Tools gaining share Electrical Vehicles a long term trend Increase in complex material & components STRATEGIC DIRECTION New product launches Increased service and customized offerings Round tools Operational excellence 25

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25 Core TRENDS Round Tools gaining share Electrical Vehicles a long term trend Increase in complex material & components STRATEGIC DIRECTION New product launches Increased service and customized offerings Round tools Operational excellence 27

26 Core TRENDS Round Tools gaining share Electrical Vehicles a long term trend Increase in complex material & components STRATEGIC DIRECTION New product launches Increased service and customized offerings Round tools Operational excellence 28

27 Core TRENDS Round Tools gaining share Electrical Vehicles a long term trend Increase in complex material & components STRATEGIC DIRECTION New product launches Increased service and customized offerings Round tools Operational excellence INSERTS 38% ROUND TOOLS 34% METAL CUTTING MARKET (160 BSEK) 29% 10% SMS MARKET SHARE 29

28 Core TRENDS Round Tools gaining share Electrical Vehicles a long term trend Increase in complex material & components STRATEGIC DIRECTION New product launches Increased service and customized offerings Round tools Operational excellence 30

29 Core TRENDS Round Tools gaining share Electrical Vehicles a long term trend Increase in complex material & components STRATEGIC DIRECTION New product launches Increased service and customized offerings Round tools Operational excellence 31

30 Core Adjacent 32

31 Adjacent Digital solutions making manufacturing chain integration possible Emerging technologies Additive Manufacturing TRENDS 33

32 SOLUTION DESIGN COMPONENT CONCEPT COMPONENT DESIGN & PROCESS PLANNING PROCESS DEFINITION PROCESS OPTIMIZATION MACHINING PREPARATION MACHINING OUTPUT VALIDATION R&D S/W CAD/CAE CAM CAM Optimization s/w Post-processing Tool life cycle mgmt (TDM) CNC CMM METAL CUTTING TOOL PLAYERS MACHINE TOOL MAKERS PRE-SETTERS CONTROL SYSTEMS CAD/ CAM SOFTWARE METROLOGY / MEASUREMENT AUTOMATION Adjacent Digital solutions making manufacturing chain integration possible Emerging technologies Additive Manufacturing TRENDS 34

33 OUTPUT VALIDATION SOLUTION DESIGN COMPONENT CONCEPT COMPONENT DESIGN & PROCESS PLANNING PROCESS DEFINITION PROCESS OPTIMIZATION Digitalization throughout the value chain MACHINING MACHINING PREPARATION Adjacent Digital solutions making manufacturing chain integration possible Emerging technologies Additive Manufacturing TRENDS 35

34 VERIFICATION & EVALUATION DESIGN & PLANNING Digitalization throughout the value chain MACHINING PREPARATION Adjacent Digital solutions making manufacturing chain integration possible Emerging technologies Additive Manufacturing TRENDS 36

35 Manufacturers today ask for strong, lightweight materials in complex designs, along with minimized waste and reduced carbon footprint Adjacent Digital solutions making manufacturing chain integration possible Emerging technologies Additive Manufacturing TRENDS 37

36 SELECTION CRITERIAS Complex shapes Expensive materials 22% CAGR Smaller series Low weight is essential Revolutionary designs Individual variations (tailored) +25% CAGR Spare-parts (to reduce lead-times and NWC) Potential to merge sub-parts into one component Graph: total AM market size Source: Smart Tech 2017 Adjacent Digital solutions making manufacturing chain integration possible Emerging technologies Additive Manufacturing TRENDS 38

37 Adjacent Digital solutions making manufacturing chain integration possible Emerging technologies Additive Manufacturing Expanding SMS digital solutions Develop an additive manufacturing offering TRENDS STRATEGIC DIRECTION 39

38 VERIFICATION & EVALUATION DESIGN & PLANNING Digitalization throughout the value chain MACHINING PREPARATION Adjacent Digital solutions making manufacturing chain integration possible Emerging technologies Additive Manufacturing Expanding SMS digital solutions Develop an additive manufacturing offering TRENDS STRATEGIC DIRECTION 42

39 VERIFICATION & EVALUATION DESIGN & PLANNING Digitalization throughout the value chain MACHINING PREPARATION TDM Cloud Line Adjacent Digital solutions making manufacturing chain integration possible Emerging technologies Additive Manufacturing Expanding SMS digital solutions Develop an additive manufacturing offering TRENDS STRATEGIC DIRECTION 43

40 VERIFICATION & EVALUATION DESIGN & PLANNING Digitalization throughout the value chain MACHINING PREPARATION CoroPlus Adjacent Digital solutions making manufacturing chain integration possible Emerging technologies Additive Manufacturing Expanding SMS digital solutions Develop an additive manufacturing offering TRENDS STRATEGIC DIRECTION 44

41 MATERIALS ADDITIVE MANUFACTURING POST PROCESSING CUSTOMER REACH Adjacent Digital solutions making manufacturing chain integration possible Emerging technologies Additive Manufacturing Expanding SMS digital solutions Develop an additive manufacturing offering TRENDS STRATEGIC DIRECTION 45

42 ACCELERATE SANDVIK 01. AM-POWDER SALES 02. MANUFACTURING SERVICES 03. ADVISORY SERVICES Adjacent Digital solutions making manufacturing chain integration possible Emerging technologies Additive Manufacturing Expanding SMS digital solutions Develop an additive manufacturing offering TRENDS STRATEGIC DIRECTION 46

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44 Adjacent Digital solutions making manufacturing chain integration possible Emerging technologies Additive Manufacturing Expanding SMS digital solutions Develop an additive manufacturing offering TRENDS STRATEGIC DIRECTION 48

45 CUSTOMER TECHNOLOGY M&A OPERATIONAL EXCELLENCE 49

46 SUMMARY 50

47 Core Adjacent 51

48 52 From a world leading player in the niche industry of metal cutting, to a leading solutions provider to the wider manufacturing industry delivering accelerated growth with maintained high profitability and returns