Sandvik as an investment
Sandvik has a strong platform to leverage on, with global market leading positions, a decentralized structure, a strong corporate culture, and financial strength. With solid strategic execution and a winning mindset, the company has gone through a significant transformation, strengthening the growth platform and building a more resilient business model. We have set an ambitious growth target of 7 percent through a cycle, consisting of organic growth and growth through acquisitions, and to date we have delivered on that target.
Innovation based on customer insights and relationships is at core of our business and our strong innovation capabilities supports organic growth and value-based pricing. During 2024, we maintained a good level of R&D investments of about 4 percent of total revenues, and investments amounted to SEK 5.1 billion. Part of our growth ambitions are related to acquired growth, where the aim is to extend our capabilities and offerings in faster growing regions, segments and applications. Since 2017, we have added over SEK 20 billion in revenues through acquisitions. A big focus for Sandvik is also to be a technology leader in the industries we serve. Today’s shifts towards digitalization, automation and the use of new technologies, are an integral part of our growth strategy, and we have set an ambition to expand our digital offering to SEK 6.5 billion in revenue by the end of 2025. In 2024, revenues from the digital offering exceeded SEK 5 billion. Sustainability is embedded in our business model and our solutions support mines to run safer and more efficient, rock processing to extract maximum value with less energy consumption, and the manufacturing industry to be more productive and resource efficient.
Sandvik is well-positioned to continue to deliver profitable growth with several global trends in our favor. The growing middle class and rapid urbanization drives the need for metals and minerals and for infrastructure investments, and it underpins demand for industrial production and manufacturing. Additionally, the green transition requires electrification minerals and increases demand for machining of lightweight materials. Demand for increased productivity, efficiency and sustainability through new technology, digitalization and automation is in line with our purpose and strategy.
Our market-leading positions and strong customer relationships, combined with a decentralized organization, enable us to respond faster to market trends and customer needs. In a dynamic and complex world, our decentralized business model helps us become more flexible, reduce earnings volatility and increase predictability; and we have increased our share of recurring revenues by expanding our parts, services and consumables business and our software business.
We continuously strive to improve our own operational efficiency and have increased the share of variable costs to reduce earnings volatility and improve our flexibility. Cash flow generation is strong in the Group, and in 2024, free operating cash flow amounted to SEK 21.2 billion. With a solid balance sheet, good cash flow generation and margin resilience, Sandvik has a strong platform to build from and is well-positioned to capture future growth opportunities.
Our purpose is to advance the world through our engineering capabilities, creating value for all our stakeholders: customers, employees and communities – ultimately leading to shareholder value. For 2024, the Board of Directors has proposed a dividend of SEK 5.75 (5.50) per share, corresponding to a payout ratio of 48 percent, well aligned with our ambition to distribute 50 percent of adjusted earnings per share through a business cycle.
The customer’s first choice
- By focusing on improving customers’ productivity and sustainability we secure market-leading positions and can maintain value-based pricing
- Strategic and long-term relationships with our customers combined with a decentralized decision model enable us to adapt faster to current and future needs
- About 4 percent of our annual revenues are spent on R&D to ensure a leading product offering
- High barriers to entry, resulting from leading technology positions, capital intensity, materials know-how and customer relationships
Shift to growth
- A solid balance sheet, good cash-flow generation
- Growth target of 7 percent through a business cycle to come from organic and acquired growth
- Investments in product development
- Capex at SEK 4.8 billion in 2024
- Acquisitions to broaden our value-creating offering, lead digitalization and automation and expand geographically in fast-growing markets
Agile through cycle
- Solid adjusted EBITA margin in 2024 of 19.2 percent in a weak market, slightly below our target range of 20–22 percent
- Strengthened margin resilience and reduced sales cyclicality by growing our parts, services and consumable businesses including software offerings
- Flexible cost structures to ensure resilience in downturns
- Continuous work to improve cost structures and operational efficiency
Shareholders rewarded
- Responsible and value-creating capital allocation
- Dividend payout policy of 50 percent of adjusted earnings per share through a business cycle
- Payout ratio of 48 percent for the year, with the average payout ratio for a three-year period amounting to 44 percent and for a five-year period to 49 percent