We Maintain Sandvik's FVE; Balance Sheet Provides Ample Opportunity for M&As and Capital Return

The short-cycle nature of demand for Sandvik’s metal-cutting tools and mining equipment exposes the group to cyclical swings in industrial manufacturing and commodity prices. A combination of divestments and restructuring, under the previous CEO, has successfully created a more resilient and profitable business, evidenced by Sandvik’s healthy 16% operating margin on depressed sales volumes in 2020. We believe this has set a good platform for the group’s strategy shift toward growth opportunities, with 2020 revenue falling below 2017 levels and certain segments facing structural headwinds.