Sandvik AB Q1 2020 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Andreas Juhani Koski - Nordea Markets, Research Division - Analyst : So firstly on SMRT. You mentioned that the aftermarket was down 2% in the quarter, but I wonder if that changed dramatically over the quarter. And how did demand look like by the end of the quarter for the aftermarket business in SMRT?

Question: Andreas Juhani Koski - Nordea Markets, Research Division - Analyst : Okay. So you didn't see close to a double-digit drop in the aftermarket business at the end of March or something like that? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. APRIL 20, 2020 / 11:00AM, SAND.ST - Q1 2020 Sandvik AB Earnings Call

Question: Andreas Juhani Koski - Nordea Markets, Research Division - Analyst : No. And then the second question is on SMT. So when the internal separation of SMT was announced last year, I think it was made very clear that the Board's ambition was to separately list SMT, hopefully, in the second half of this year. So has that ambition changed, new CEO, or is that still the clear ambition?

Question: Andreas Juhani Koski - Nordea Markets, Research Division - Analyst : Okay. So the ambition is to separately list it?

Question: Edward Perry - HSBC, Research Division - Analyst : Yes. Firstly, just a follow-up on China and SMS. And I appreciate you mentioned the difficulties of interpreting the data so far, but has the recovery that you saw in March being maintained through the first weeks of April? And is the ramp-up in customer activity still as strong as your own ramp-up in production?

Question: Edward Perry - HSBC, Research Division - Analyst : Okay. And then secondly, on the mining side, I mean we're seeing cuts to 2020 CapEx and production start to materialize over the last few weeks. But from your own conversations with mining customers, what is your sense that these budgets will be rolled into and added back to 2021 budgets? Or do you feel spending time lines will simply be pushed further away into the next years? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. APRIL 20, 2020 / 11:00AM, SAND.ST - Q1 2020 Sandvik AB Earnings Call

Question: Andrew J. Wilson - JP Morgan Chase & Co, Research Division - Analyst : A couple of questions, please. Just on SMS and thinking about the cost base, and there's obviously been a lot of work done in the sense of adding the flexibility. Just wanted to get a sense of sort of where we are in terms of temporary labor in that business at the moment. I mean do we have sort of the shorter time lever to pull? Obviously, you've got the bigger program. But just -- so how quickly can you be bringing people back on and off given that there's clearly a huge amount of uncertainty in terms of almost week-to-week where demand develops? Just trying to get a sense of sort of how you're thinking about that.

Question: Andrew J. Wilson - JP Morgan Chase & Co, Research Division - Analyst : That's helpful. Are there any particular regions which are proving more difficult to kind of implement that sort of flexibility? Or is it -- are you feeling pretty good about the flexibility all over the business?

Question: Andrew J. Wilson - JP Morgan Chase & Co, Research Division - Analyst : That's helpful. And then just on to Tomas, please. I guess following up a little bit on an earlier question. But thinking about working capital, if I kind of look through previous downturns at Sandvik, I can see that generally, albeit with a bit of a lag, but there was a pretty good improvement in terms of working capital. Just any sort of help or kind of indications you can give us in terms of how we might see working capital develop over the next couple of quarters and sort of what changes or processes you're sort of putting in place that help drive that?

Question: Peter Testa - One Investments S.A.G.L. - Analyst : I was wondering if you could just help us a bit on the SEK 1.5 billion of short-term cost savings, the extent to which these are really reflecting what you described on taking advantage of flexible labor programs or also including other costs. And maybe if you have further opportunity in flexible labor plans outside this SEK 1.5 billion.

Question: Peter Testa - One Investments S.A.G.L. - Analyst : Okay. And the other question was just most industrial companies are talking about restraining CapEx and then some industries cutting production rates. When you think about what you need to do with Sandvik through Q2 to kind of prepare yourself for these set of customer responses in later in the year, what sort of steps do you think you need to take? Where are you focusing to kind of prepare the organization for this kind of customer demand environment in H2? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. APRIL 20, 2020 / 11:00AM, SAND.ST - Q1 2020 Sandvik AB Earnings Call

Question: Peter Testa - One Investments S.A.G.L. - Analyst : Okay. So you don't feel the need to address on shift patterns or take account on working capital sort of bringing as a percentage of sales more in line where it was a year ago and so on?