Sandvik AB

We expect that Sandvik will continue to deliver very strong credit ratios, but will demonstrate some appetite for inorganic growth and extra ordinary costs, for example the planned separation of its Sandvik Materials Technology (SMT) business could lead to some temporary extra costs. We continue to expect FFO to debt for both 2019 and 2020 will be well in excess of 150%. In 2018, FFO to debt reached 158%. In addition, we project robust FOCF of SEK10 billion–SEK12 billion for each year. From January 2020, Sandvik's CEO Björn Rosengren will step out from his role, and hand over to Stefan Widing. We believe that, over the last four years, Mr. Rosengren reshaped Sandvik and made its business model more agile.

...S&P Global Ratings expects Sandvik AB's top-line growth for 2019 will be in line with 2018, and will decline by 3%-7% in 2020 on the back of lower demand and softening economic conditions. Demand in Sandvik's automotive, general engineering, and energy end markets has started to decline. We view these markets as early-cycle, related more to Sandvik's machining solution business. We expect the drop that started in the second quarter of 2019 will continue into 2020, leading to a decline in topline growth of 3%-7% in 2020. More positively, we note that mining demand continues to be robust, with order intake growth for Sandvik of 4% in the first nine months of 2019 versus the same period in 2018. Overall this translated into similar consolidated order intake and revenue for Sandvik in the first nine months of 2019 versus the same period last year, at about Swedish krona (SEK) 79 billion and SEK77 billion respectively. With this in mind, we believe sales for 2019 will remain at 2018 levels,...

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