Sweden-based engineering group Sandvik has announced its plan to dispose of the project business, Mining Systems, through which it has generated about a quarter of its mining division revenue in the past. We believe that the transaction will support the group's profitability, but will weaken credit ratios in the short term, due to the incurrence charges that Sandvik estimates at about SEK1 billion. We are affirming our 'BBB/A-2' ratings on Sandvik. The negative outlook reflects the likelihood of a downgrade if Sandvik's operating performance fails to demonstrate a clear path to recovery, with funds from operations to debt improving toward 30% throughout 2016, or if we see that Sandvik is unable to improve its profitability following an expected weak 2015.
