Business in 2019
Stability, profitability, growth
After some challenging years, there has been a return to profitability in the business area. Long-term efforts to improve market positioning led to a number of large tubular orders in 2019, including one for advanced OCTG tubes. Our efforts also paid off in the strip steel business, where we saw a continued strong margin improvement during the year. Sandvik Materials Technology is now in a stronger position with a clear growth strategy for prioritized segments. In December we signed an agreement to acquire privately owned Summerill Tube Corporation, based in Pennsylvania, US, a manufacturer of high precision tubes for high demanding industries, including aerospace, transportation and petrochemical. The acquisition was finalized in January 2020 and the same month we also acquired privately owned Thermaltek Inc., a manufacturer of high temperature furnace systems and metallic heating elements, headquartered in North Carolina, US.
Efficiency and continuous improvements
During the year, Sandvik Materials Technology continued to improve price and cost efforts despite challenging market conditions. We initiated efficiency measures, carrying through with the decisions made in 2018 to consolidate in some areas, by closing a Tube production unit in Canada and a Kanthal production unit in Italy. In 2019, a decision was made to close two Tube mills in Sandviken, Sweden, and move production to our site in Chomutov, Czech Republic. We began the gradual transfer of production in 2019, which is scheduled for completion in the first half of 2021. We inaugurated a new cold finishing manufacturing line at our plant in Mehsana, India, improving quality, flexibility and regional service.
We signed a strategic agreement with German Zapp to manufacture Kanthal® wire on our behalf for further efficiencies. We continued to revise our factories and offices for higher flexibility and efficiency, which is helping us to manage our costs and adapt quicker in a volatile global environment. Today, the business area is in an improved position to simultaneously manage both periods of high growth, as well as slowdowns in our diverse market segments.
2019 in figures
Revenues by customer segment
Revenues by market area
MSEK |
2018 |
2019 |
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|---|---|---|---|---|---|---|
|
||||||
Order intake |
15,898 |
16,475 |
||||
Revenue |
14,697 |
15,279 |
||||
Operating profit |
1,307 |
1,444 |
||||
Operating margin, % |
8.9 |
9.4 |
||||
Adjusted operating profit1) |
1,331 |
1,787 |
||||
Adjusted operating margin, % |
9.1 |
11.7 |
||||
Return on capital employed, % |
10.1 |
11.0 |
||||
Number of employees2) |
5,919 |
5,726 |
||||
Gender balance (Men/Women), % |
82/18 |
81/19 |
||||
Women in managerial positions, % |
18.5 |
19.1 |
||||
Lost time injury frequency rate (LTIFR) |
4.3 |
4.7 |
||||
Total recordable injury frequency rate (TRIFR) |
7.5 |
7.5 |
||||
Sustainable business
Sustainability is well integrated within our business both in terms of our own operations and within our customer offering. Installations of Kanthal heating solutions, switching from gas to electric heating at our customers, helped reduce our customers’ CO2 emissions substantially. The products that we manufacture at our steel mill consist of an average of 84 percent recycled material and we keep track of how much recycled steel goes into every product. We pass on this information to our customers in the form of materials certificates. We are also active in a number of buy-back initiatives to reduce our use of virgin material, whereby reducing costs and environmental impact.
We provide solutions that make our customers more sustainable. Flapper valves made with our compressor valve steel Hiflex® are turning household refrigerators into energy-smart models. Other products, like Exera, our wire used in medical applications, are helping to improve and even save people’s lives. We offer pre-coated strip steel for the production of bipolar plates and interconnects for different types of fuel cells and have a full-scale production plant in Sandviken, Sweden, ready for fuel cell and hydrogen technology to take off. Our seamless steel tubes Pressurfect® meet the higher pressure requirements for next-generation engine platforms. Gasoline direct injection (GDI) technology helps reduce fuel consumption and lowers CO2 emissions.
Looking ahead
Our strategy will continue in the year to come. We will maintain our number 1 or 2 position on the market through our customer relationships and innovation capabilities. This will be achieved by helping our customers to improve their efficiency, sustainability and safety. We will continue to expand and promote our digital offering, for example within smart tubing which makes it easier for customers to track and trace and identify stock levels. In the coming year we will finalize our internal separation and continue the review for a possible listing on the Nasdaq Stockholm Exchange.