Sandvik AB To Acquire Software Company CGTech Call Transcript

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

Question: Andreas Juhani Koski - Nordea Markets, Research Division - Analyst : You mentioned that 50% of sales are recurring revenues but could you please give us a sense of how it has performed in Q2, in Q3 now during 2020 to better understand the cyclicality of this business?

Question: Andreas Juhani Koski - Nordea Markets, Research Division - Analyst : Okay. Yes, because I saw that you mentioned aerospace and defense as a key end market, and automotive was also on there. So how much of sales is aerospace and how much is automotive?

Question: Andreas Juhani Koski - Nordea Markets, Research Division - Analyst : I was probably a bit unclear. How much of sales in 2019 was to the aerospace industry? And how much was to the automotive industry? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 20, 2020 / 2:00PM, SAND.ST - Sandvik AB To Acquire Software Company CGTech Call

Question: Anders Roslund - Pareto Securities AS, Research Division - Analyst : Yes. I had a question regarding the press release from yesterday. You said that there would be -- the acquisition would be EPS neutral initially. Are there some heavier PPA amortizations in the beginning? Or is it just that as it grows, it gets less important? Or how should we see upon that wording initially? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 20, 2020 / 2:00PM, SAND.ST - Sandvik AB To Acquire Software Company CGTech Call

Question: Anders Roslund - Pareto Securities AS, Research Division - Analyst : No, but sometimes, you could have some amortizations that are heavier during the first year, taking some more of the profit. Okay. Then the second question was about Metrologic. Will you have some synergies between those 2 entities?

Question: Anders Roslund - Pareto Securities AS, Research Division - Analyst : So there is no sort of idea? That's another question before here that you would separate the software parts of the business into another division or something like that.

Question: Andrew J. Wilson - JPMorgan Chase & Co, Research Division - Analyst : Just a couple really. I'm just interested on the process by which the acquisition was done. Was it -- I guess was it an auction process where there were other parties involved? And kind of if there was a trigger for, I guess, this event given you've obviously known the business for some time? Just interested as to anything that impacted the timing. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 20, 2020 / 2:00PM, SAND.ST - Sandvik AB To Acquire Software Company CGTech Call And I guess second question linked to this is whether you saw interested parties in this acquisition at the time that you were doing it or not. Just what you're seeing from your competitors in terms of looking at assets like this and just the general shift of how your competitors are, I guess, approaching the sort of digitization of machine tooling?

Question: Andrew J. Wilson - JPMorgan Chase & Co, Research Division - Analyst : And maybe just sort of an extension of the second question is just to sort of get a sense of that. You are seeing I guess the kind of nontraditional competitors in this space as opposed to the sort of names we just traditionally associated with SMS.

Question: Andreas Juhani Koski - Nordea Markets, Research Division - Analyst : A couple of more questions if we have time for that. The first one is on pricing power. You mentioned that CGTech was multiple times larger than its closest competitor. So pricing power should be quite good, I guess. Do you have a sense how much of the high single-digit growth that CGTech has seen historically that comes from price increases?

Question: Andreas Juhani Koski - Nordea Markets, Research Division - Analyst : So the growth comes mainly from volumes historically, and then hopefully, you will add a price component to that in the future?

Question: Andreas Juhani Koski - Nordea Markets, Research Division - Analyst : Yes. Okay. Great. And then a broader question on the growth outlook for Sandvik Machining Solutions because we know that SMS is meeting some structural headwinds in the coming years. And for the group, you have a growth target of more than 5% over an economic cycle. Do you expect SMS to be able to reach that too? And how much of the growth in SMS do you think needs to come from acquisitions to reach 5% or more?

Question: Andreas Juhani Koski - Nordea Markets, Research Division - Analyst : Yes. I'll keep it for the CMD.