Welcome to Sandvik Capital Markets Day Beijing, China 21 May, 2004 Sandvik Capital Markets Day,China 2004 Page 1
Agenda z
9.00 – 9.30
Registration, coffee, practical info
Jan Lissåker
z
9.30 – 9.50
Introduction, Sandvik Group
Heléne Gunnarson
z
9.50 – 10.15
Sandvik in China, overview
Anders Hägglund
z 10.15 – 10.30
Sandvik Tooling
Ee Sian Lee
z 10.30 – 10.45
Sandvik Mining and Construction
Lawrence Luo
z 10.45 – 11.00
Sandvik Materials Technology
Per Lindén
z 11.00 – 11.15
Q&A
z 11.15 – 11.30
Coffee, tea, refreshments
z 11.30 – 12.45
Bus transport to Coromant, Langfang
z 12.45 – 14.00
Buffé lunch
z
Langfang presentation history, strategy, Q&A Rolf Johansson
z 14.00 – 14.30
Plant tour Langfang
z 14.30 – 16.30
Bus transport to evening event (For some back to the hotel)
z 16.30 – 18.00
Evening event
z 18.00 – 20.00
Dinner
Sandvik Capital Markets Day,China 2004 Page 2
Host: Anders H
Sandvik Participants z Presenting: z Heléne Gunnarson,
SVP Sandvik Group Communications
z Anders Hägglund,
Manager Sandvik China
z Ee Sian Lee,
Manager Sandvik Coromant China
z Lawrence Luo,
Manager Sandvik Mining and Construction China
z Per Lindén,
Manager Sandvik Process Systems China
z Rolf Johansson,
Site Manager Langfang
z Others: z Peter Hammarberg,
Financial Manager Sandvik China
z Jan Lissåker,
Manager Sandvik Investor Relations
z Carin Sundin,
Sandvik Group Communications
z Lisa Lee,
Sandvik China
Sandvik Capital Markets Day,China 2004 Page 3
Heléne Gunnarson Group Communications 21 May, 2004 Sandvik Capital Markets Day,China 2004 Page 4
Global Expansion SEK M 50 000
Africa/Middle East Asia/Australia South America NAFTA
25 000 EU Other Europe
0 1993
Sandvik Capital Markets Day,China 2004 Page 5
2003
The Productivity Gap 130 120
Cost inflation, input
110 100
Source: VI Sandvik Capital Markets Day,China 2004 Page 6
Productivity gap
Price development, finished products
Sandvik Sales in Asia/Australia SEK M
10 000
7 500
5 000
1994 1995
1996 1997 1998 1999 2000
9 946
2001 2002 2003
Profitability as Group average Sandvik Capital Markets Day,China 2004 Page 7
9 306
9 569
8 111
6 528
6 327
5 316
4 197
4 345
0
3 630
2 500
Sales 2003 SEK 9.9 bn Per market Other Asia 28%
India 7%
Per Business Area Materials Technology 25%
Japan 18%
Tooling 29%
Australia/NZ 35% China 12%
Mining and Construction 46%
Asia/Australia Sandvik Capital Markets Day,China 2004 Page 8
Sandvik in Asia/Australia z The fastest growing region 9 20% of Sandvik sales, SEK 10 bn 9 13% of all employees 9 7% of production, mainly in Japan, India and Australia 9 Organic growth 13% in 2003
z Key area for future growth 9 Foreign investments on a high level 9 Technological development 9 Higher educational level 9 Higher standard of living
Sandvik Capital Markets Day,China 2004 Page 9
Sandvik in Asia/Australia
zSandvik has a long history
Sandvik Capital Markets Day,China 2004 Page 10
China 1985
Japan 1976 South Korea 1986
India 1960 Singapore 1969
Australia 1961
Sandvik in Asia/Australia z Sandvik has a strong position 9 Sales organization in the whole region 9 Close relations to existing and potential customers 9 Production in Australia, Japan, India, China and Korea 9 Distribution center in Singapore
Sandvik Capital Markets Day,China 2004 Page 11
Anders Hägglund Sandvik China 21 May, 2004 Sandvik Capital Markets Day,China 2004 Page 12
Welcome to Sandvik in China
Sandvik Capital Markets Day,China 2004 Page 13
Perspective z In year 2010 there will be 250 million middle class people in China. (2003: 80 m) z The purchasing power will be USA +50% z Average GDP growth 7-10% annually
“The economist -95” Sandvik Capital Markets Day,China 2004 Page 14
Sandvik History in China/HK 1985
First representative offices opened.
1993
Sandvik China Ltd. registered.
1994
Qingdao Sandvik Die Cutting Systems Co. Ltd. registered.
1996
“Merger” Sandvik Hongkong into Sandvik China. Sales office No. 10 opened.
1997
Sandvik International Trading (Shanghai) Ltd. registered. “Merger” Tamrock China into Sandvik China.
1998
Sandvik Process Systems (Shanghai) registered.
2000
Sandvik Steel (Qingdao) Ltd. registered.
2003
Shanghai / Xinzhuang (SMT/Tooling) inaugurated.
Sandvik Capital Markets Day,China 2004 Page 15
Sandvik Presence in China/HK z More than 600 employees
Changchun Shenyang
z 20 sales offices z 4 manufacturing sites z Only wholly owned units z Main customers in automotive, mining, construction segments z Most of sales to domestic customers, big variances
Beijing Langfang Tianjin Qingdao Luoyang Wuxi.Suzhou Xi’an Nanjing Shanghai Hangzhou Chengdu Wuhan Chongqing Xiamen Guangzhou
Dongguan
HongKong
Sandvik Capital Markets Day,China 2004 Page 16
Business Strategy
z …an expanding segment z Sell on value for the customer z …many customers are global
High
Technology level
z Focus customers with high technological level
Low
Sandvik Capital Markets Day,China 2004 Page 17
Business concept –
to increase customers’ profitability Sandvik reduces customers’ costs through
z new products z service z training
Sandvik Capital Markets Day,China 2004 Page 18
Increase in customers’ profitability
Sandvik Sales in China/HK Invoicing SEK M
N:o of employees
1 251
1 145
855
679
0
504
300
524
500
387
600
233
1 000
227
900
229
1 500
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
>25% annual sales growth in local currency Sandvik Capital Markets Day,China 2004 Page 19
0
Sandvik in Langfang
Sandvik Capital Markets Day,China 2004 Page 20
Sandvik in Shanghai
Sandvik Capital Markets Day,China 2004 Page 21
Sandvik in Qingdao
Sandvik Capital Markets Day,China 2004 Page 22
Threats and Opportunities Threats:
Opportunities:
z Increased performance from domestic competitors
z Developing domestic industry
z Technology transfer
z High foreign investments
z Macro economic slow-down
z Huge needs for infrastructural upgrading
z Crisis, political and financial
z Increased standard of living z Increased educational level z Transition to market economy
Sandvik Capital Markets Day,China 2004 Page 23
Sandvik China Main Competitors z Sandvik Tooling 9 Kennametal, Iscar, Mitsubishi, Toshiba, Zhuzhou, Zigong
z Sandvik Mining and Construction 9 Atlas Copco, Ingersoll Rand, Metso Minerals, Furukawa, DBT & Joy
z Sandvik Materials Technology 9Sumitomo, Daido, Tubacex, DMV, Uddeholm
Global competitors Sandvik Capital Markets Day,China 2004 Page 24
Sandvik China HR Development z Employing young graduates with 2-3 years job experience z Intensive internal training, technical and commercial z On the job training/coaching z Internal promotions z Management/Leadership training z Training abroad z Sandvik culture and management style
Sandvik Capital Markets Day,China 2004 Page 25
Sandvik China Objectives z Increase Sales 9 Increase and develop market and sales organization
z Exploit from a Solid Foundation 9 Invest in manufacturing where appropriate
z Reach the Sandvik Group Top 10 market list in 2004
>40% order intake growth 2003 Sandvik Capital Markets Day,China 2004 Page 26
Ee Sian Lee Sandvik Tooling China 21 May, 2004 Sandvik Capital Markets Day,China 2004 Page 27
Sandvik Tooling in China Invoicing SEK M
N:o of employees
600
*
500 400 300
600
z Strong market position 9 More than 150 sales engineers
500
9 48 hours delivery from Singapore
400
9 Direct and distributor sales network
300
9 Sales mainly to domestic customers
z Development of sales force 200
200
z Introducing more Tooling brands and products
100
100
z Increased focus on special tools
0
0 94 95 96 97 98 99 00 01 02 03
* >30% increase in local currency Sandvik Capital Markets Day,China 2004 Page 28
z Productivity Center in Shanghai
Market Profile z Strong market growth 9 65% sales to domestic customers 9 High investments in important customer segments 9 Automotive 9 General engineering (example: Power generation and small part machining)
z Increasing technology level in domestic companies z WTO, Olympics 2008, World Expo 2010
Sandvik Capital Markets Day,China 2004 Page 29
Sandvik Capital Markets Day,China 2004 Page 30
Total Vehicle Output
Millions of vehicles
6
4
5,25
4,44
3,25
2,33
2,07
1,83
1,63
1,58
1,46
1,43
0
1,35
2
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 est Sandvik Capital Markets Day,China 2004 Page 31
Sandvik Tooling Strategy z Expand customer base z Increase market share at key accounts z Increase focus on local machine tool manufacturers z Increase focus on special products z Forceful introduction of new products z Improve customer relationship and service z Introduce new Tooling brands and enhance brand awareness
Sandvik Capital Markets Day,China 2004 Page 32
Lawrence Luo Sandvik Mining and Construction China 21 May, 2004 Sandvik Capital Markets Day,China 2004 Page 33
“The National Bird of China”
Sandvik Capital Markets Day,China 2004 Page 34
Sandvik Mining and Construction in China Invoicing SEK M
z Improved market position
400
9 8 sales offices 9 Direct sales 9 Full Function Service Stations at big mines
300
9 Sales mainly to domestic customers
200
9 Around 50 employees
z Solid domestic customer base for all SMC product lines
100
z Established name and reputation 0 94
95
96
97
98
99
00
Sandvik Capital Markets Day,China 2004 Page 35
01
02
03
z Service and support for customer satisfaction
Market Profile z Annual growth in Construction equipment market about 50%, replaces Japan as second largest in the world z The worlds largest coal producer, > 1 bn ton per year z High GDP growth means large consumption of 9 cement 9 steel 9 oil 9 copper
z Increased raw material prices means increased excavation activities
Sandvik Capital Markets Day,China 2004 Page 36
A Promising Market z Budgeted Construction investments for 2001-2005 (USD billions)
HIGHWAYS
RAILWAYS
HYDROPOWER
HOUSING
2001
33
5
10
106
2002
36
6
11
125
2003
39
7
13
156
2004
40
8
14
181
2005
39
8
14
206
187
34
62
775
TOTAL
Total 2001 to 2005, 1,058 Billion US$ Sandvik Capital Markets Day,China 2004 Page 37
A Successful 2003 Many key orders: z In metallurgical and non-ferrous mining 9 Crushers and loaders
z Coal mining 9 VAB equipment
z Construction 9 Tamrock jumbos
Sandvik Capital Markets Day,China 2004 Page 38
SMC Strategy z Intensify market coverage 9 New regional offices, increased local resources
z Faster delivery of service and parts 9 Sourcing
z More competitive product offering 9 Introduction of new products
z Strengthen the SMC umbrella, utilize synergies
Sandvik Capital Markets Day,China 2004 Page 39
Per Lindén Sandvik Materials Technology China 21 May, 2004 Sandvik Capital Markets Day,China 2004 Page 40
Sandvik Materials Technology in China Invoicing SEK M
N:o of employees
160
300
z Improved market position 9 50 sales engineers 9 Direct sales
120
225
9 Sales to domestic and international customers. 9 Plant in Qingdao since 1994
80
150
9 New plant in Shanghai 2003
z Good brand recognition 75
0 94 95 96 97 98 99 00 01 02 03
Sandvik Capital Markets Day,China 2004 Page 41
40
z Strong market segments with good growth
0
z Suitable timing for introduction of many traditional SMT applications
Market Profile z Basic business in several very strong segments with good growth prospects z Good demand for many traditional SMT applications, like: 9 Seamless tubes 9 Press Plates for lamination 9 Kanthal metallic heating elements 9 Steel Belts for Process industry 9 Process Equipment
z Very strong growth in segments like chemicals, construction & electronics z Increasing demand for high value-added products
Sandvik Capital Markets Day,China 2004 Page 42
Seamless Tubes z Application: UREA Fertilizer 9 China produce 25% of all Urea in the world 9 Traditional strong segment for Sandvik seamless tubes
z Application: Hydraulic and instrumentation tube 9 Competitive high tech product 9 Sizable and growing market
Sandvik Capital Markets Day,China 2004 Page 43
Lu Tian Hua Urea Plant Sichuan Province 110 tons of urea tubing revamp in 2002.
Process Equipment z Application: Wax solidification 9 By-product of lubricating oil 9 Production follows industrial development 9 Sandvik delivered systems to major refineries in China
z Process equipment manufactured in Shanghai since 1999 9 Key components from Germany and Sweden
Sandvik Capital Markets Day,China 2004 Page 44
Four rotoform plants prepared for delivery to Fushun refinery of PetroChina at SMT plant in Shanghai
SMT Strategy z Strong niche focus z Expand customer base z Introduce products for more applications z Improve local technical competence and service to strengthen customer partnerships z Local production where motivated z Build leadership competence for continued expansion Sandvik Capital Markets Day,China 2004 Page 45
SMT leadership training 2004
Q&A session and then off to Langfang...
Sandvik Capital Markets Day,China 2004 Page 46
Rolf Johansson Sandvik Coromant, Langfang China 21 May, 2004 Sandvik Capital Markets Day,China 2004 Page 47
Langfang Production
Employees: Total Tool production Insert production Common
150 40 70 40
Sandvik Capital Markets Day,China 2004 Page 48
Total investment: USD 30 m
Langfang History 1993
Langfang Development Zone established Sandvik China Ltd acquires 35.000 m2 of land. SCL first Swedish fully owned company in China
1994
First factory (tools) started 1.500 m2 workshop area
1997
Second factory started (inserts) 3.000 m2 workshop area ISO 9001. Version 2000 in Dec. 2003
2004
ISO 14001 planned for June
Sandvik Capital Markets Day,China 2004 Page 49
Langfang Today Certified global supplier for Tooling Sandvik Coromant Standard products Group supplier Special products Regional supplier Sandvik Hard Materials Rotary cutters
Sandvik Capital Markets Day,China 2004 Page 50
80 % (catalogue) (central stocks) 20 % (customer request) (Asia/ Pacific)
Operation Flow Inserts Imported semifinished inserts Grinding
Edge-Reinforce
Coating Marking, packing and distribution Sandvik Capital Markets Day,China 2004 Page 51
Operation Flow Tools Steelbars
Cut off, turning, rough milling
3 - 5 axis machining
Distribution
Sandvik Capital Markets Day,China 2004 Page 52
Hardening, blackening, marking, assembly and packing
Langfang Performance Certified global supplier for Tooling Quality, internal benchmarking Rejection rate Group spotchecks Customer complaints
= Top = Excellent = Excellent
Total quality
= Excellent
Lead times
= Excellent
based on highly educated personnel
Sandvik Capital Markets Day,China 2004 Page 53
Opportunities / Threats z Opportunities: 9 Fast growing market 9 Access to educated and skilled people 9 Improving infrastructure and less bureaucracy
z Threat: 9 Sandvik is a good recruitment base for other companies
Sandvik Capital Markets Day,China 2004 Page 54
Langfang Products
Sandvik Capital Markets Day,China 2004 Page 55
Langfang Future
Focus and expand special tools supply for Asia /Pacific region
Sandvik Capital Markets Day,China 2004 Page 56
Sandvik Capital Markets Day,China 2004 Page 57
Thank you for visiting Sandvik in Langfang!
Sandvik Capital Markets Day,China 2004 Page 58
Thank you for visiting Sandvik in China!
Sandvik Capital Markets Day,China 2004 Page 59
Cautionary Statement “Some statements herein are forward-looking and the actual outcome could be materially different. In addition to the factors explicitly commented upon, the actual outcome could be materially effected by other factors like for example, the effect of economic conditions, exchange-rate and interest-rate movements, political risks, impact of competing products and their pricing, product development, commercialisation and technological difficulties, supply disturbances, and the major customer credit losses.”
Sandvik Capital Markets Day,China 2004 Page 60
www.sandvik.com
Sandvik Capital Markets Day,China 2004 Page 61
