Sandvik AB Interim Report Six months ended 30 June 2000

8/9/2000 4:05 AM EST

SANDVIK AB - Interim Report
Six months ended 30 June 2000

* Profit after financial income and expenses rose to SEK 3,310 M (1,811),
including nonrecurring items amounting to a positive SEK 660 M
* Increased profitability in all business areas
* Continued favorable business climate - order intake up 17%
Market

Industrial production within the OECD had an annual growth rate of 4%.
The production pace in the US remained high. Growth in Europe increased
to an annual rate of approximately 3% and leading indicators remain
positive. The Japanese economy was strengthened, but from a low level.
Growth in China, Korea and Southeast Asia was high. Economic conditions
in South America improved, with Brazil as the economic engine.

Consumer-oriented industries, particularly the electronics industry,
continued to show high capacity utilization. Demand rose in the mining,
construction, oil and gas and petrochemical industries. Investment
willingness, however, was still low in the latter two areas.

The economic trend had a favorable effect on Sandvik and demand was
strong within most product segments during the first half of the year.

Sales (see appendix 2)
[REMOVED GRAPHICS]

Sandvik's order intake during the first half of the year amounted to SEK
22,730 M (20,130), which was 13% higher compared with the corresponding
period a year earlier. At fixed exchange rates for comparable units,
order intake increased by 17%.

Order intake increased in all markets. Demand in Europe was strong, and
now has also improved in the UK. Activity in Central and Eastern Europe
was high. Order intake continued to be favorable in NAFTA for all
business areas.

Demand in South America rose primarily in Brazil whereas in the other
markets in the region the situation was fragmented. Order intake in the
Asia, Australia region continued to rise, particularly in China, India
and Southeast Asia. In Japan the trend was also highly favorable.

Demand from the engineering, automotive, electronics and consumer-related
industries increased sharply and remained high during the second quarter.

Order intake from the mining and construction industry was very positive.
On the other hand, demand from key customer segments such as the chemical
and process industries, which generally are positioned later in the
business cycle, was relatively weak.

Invoiced sales amounted to SEK 21,360 M (19,990) for the period, an
increase of 7%. At fixed exchange rates for comparable units, sales rose
11% compared with the year-earlier period. In the second quarter, sales
were 11% higher than in the preceding year and 7% higher than in the
first quarter this year.

Earnings (see appendix 1)
Q 1-2 Q 1-2 Change
1999 2000 %
Invoiced sales, SEK M 19 21 +7
990 360
Operating profit SEK M 2 101 3 550 +69
as % of invoiced sales 11 17
Op. profit excl. items affecting 2 101 2 890 +38
comparability, SEK M
as % of invoiced sales 11 14
Op. profit after financial items, SEK 1 811 3 310 +83
M
as % of invoiced sales 9 15
Profit after financial items, 1 811 2 650 +46
excl. items affecting comparability,
SEK M
as % of invoiced sales 9 12
Net profit, SEK M 1 118 2 096 +87
as % of invoiced sales 6 10

Operating profit for the first six months amounted to SEK 3,550 M
(2,101), up 69%. This included items affecting comparability amounting to
SEK 660 M. These involved a surplus concerning pension funds held for
Sandvik by the SPP insurance company. The net total amounts to SEK
360 M, including provisions for contractual retirements of salaried
employees expected to take place during 2000-2001. Also included is a
capital gain of SEK 300 M from the sale of the Group's captive insurance
company in the first quarter.

Excluding items affecting comparability, operating profit rose 38% and
for comparable units by 43%. Operating margin amounted to 14% (11) of
invoiced sales. The improvement was attributable mainly to higher volumes
and productivity in all business areas.

Net financial expense was SEK -240 M (-290). Interest expenses were lower
than in the corresponding period of the preceding year, as a result of
lower net debt.

Profit after net financial income and expenses was SEK 3,310 M (1,811).

[REMOVED GRAPHICS]
Net profit amounted to SEK 2,096 M (1,118). Earnings per share were SEK
8.10 (4.30). Earnings per share during the most recent 12 months amounted
to SEK 17.80 (14.00 for full year 1999).
Excluding items affecting comparability, net profit amounted to SEK 1,537
M and earnings per share were SEK 10.70 (9.00) for the most recent 12
months.

Return on capital employed, before items affecting comparability, was for
the most recent 12 months, 17.4% (15.1 for full year 1999), and return on
shareholders' equity 14.1% (12.4% for full year 1999).

Invoiced sales of the Parent Company were SEK 6,157 M (5,209) and
operating profit was
SEK 711 M (390).

Structural changes
In the beginning of the year, Sandvik CTT acquired a former agent in the
US, Titex Tools Inc., for the purpose of intensifying marketing of
Titex's application tools to advanced US industries.

In the second quarter, Sandvik's Mining and Construction business area
concluded its acquisition of the production of drilling rigs from two
Austrian companies that are part of the Neuson Group. Annual sales are
estimated at SEK 120 M.

Since March, Sandvik has been a joint-owner of a new venture-capital
company,
b-business partners, together with the principal shareholders ABB and
Investor and a number of large Swedish industrial companies. b-business
partners invests in and develops European companies focusing on e-
commerce.

The Group's captive insurance company was divested during the period.

Business areas (see appendix 2)
Sandvik's operations are concentrated around its three core businesses:
Sandvik Tooling, Sandvik Mining and Construction, and Sandvik Specialty
Steels, areas in which the technology content is considerable and the
Group occupies leading global positions in its selected niches. Sandvik
Tooling includes Sandvik Coromant, Sandvik CTT and Sandvik Hard Materials
and a small remaining distribution activity for Saws and Tools products
on certain markets. Sandvik Specialty Steels comprises Sandvik Steel,
Kanthal and Sandvik Process Systems.

Sandvik Tooling's invoiced sales amounted to SEK 7,650 M (6,709), an
increase of 9% at fixed exchange rates for comparable units. Demand from
the engineering and automotive industries was favorable, as was demand in
such customer areas as medical technology, die and mould and electronics.

Order intake was SEK 7,952 M, 12% higher for comparable units than in the
preceding year, primarily due to strengthened market positions with
increased market shares. The highly favorable trend in all markets,
particularly in the US, Asia, Germany and Brazil, continued in the second
quarter.

Order intake included SEK 392 M and sales included SEK 364 M from the
remaining activities in Sandvik Saws and Tools.

Operating profit in the first half of the year amounted to SEK 1,570 M
(1,279), corresponding to 21% of invoiced sales. The improvement was due
mainly to favorable volume development and productivity increases.

Sandvik Coromant continued to expand its marketing activities
substantially by reinforcing its sales organization, including
investments in e-business on the Internet.

Sandvik Mining and Construction's invoiced sales amounted to SEK 4,914 M
(4,336), up 12% at fixed exchange rates for comparable units. The order
intake improved considerably and was SEK 5,352 M, 20% higher than a year
earlier. Demand from the mining and construction industries remained
favorable. Many projects that have been in the planning stage for some
period are now being realized, particularly in Eastern Europe, South

America and Australia.
Operating profit for the half-year period amounted to SEK 496 M (293),
corresponding to 10% of invoiced sales. Operating profit for the second
quarter amounted to SEK 287 M (178) - or 11% (8). The sharp improvement
is due to higher capacity utilization, combined with the effects of the
completed restructuring program.

Sandvik Specialty Steel's invoiced sales amounted to SEK 6,902 M (6,011).
The increase at fixed exchange rates for comparable units was 14%, of
which 6% is price-related and mainly attributable to a higher alloy
surcharge. The positive trend in demand continued and order intake was
SEK 7,511 M, or 27% higher than in the preceding year. As earlier, sales
were most favorable for products for consumer-related and maintenance-
oriented areas, as well as for applications in the electronics industry.

Total operating profit amounted to SEK 588 M (288), 9% of invoiced sales.
In the second quarter, operating profit was SEK 321 M (165), 9% (5). All
business sectors increased their profits through higher volumes and
productivity. Changes in nickel prices affected inventory valuation
favorably, by approximately SEK 60 M.

Capital expenditures
Group investments in property, plant and equipment amounted to SEK 823 M
(897). Acquisition of companies and operations amounted to SEK 369 M.

Financing and liquidity
Interest-bearing liabilities and provisions less liquid funds yielded net
debt of SEK 8,164 M (6,014 at 31 December 1999). Liquid funds amounted to
SEK 1,858 M (2,369) and loans totaled SEK 7,315 M (5,611). Cash flow from
operating activities amounted to SEK 1,460 M. After capital expenditures
cash flow was SEK 92 M.

The number of shares at 30 June 2000 was 258,696,000. Shareholders'
equity per share was SEK 77.60 (77.70 at 31 December 1999) and the
equity/assets ratio 50% (52). The Annual General Meeting held on 4 May
2000 voted to change the Articles of Association to permit only one class
of share.

Personnel
The number of employees in the Group at 30 June 2000 was 34,029 (33,870
at 31 December 1999), a slight decline for comparable units since year-
end 1999.

Market outlook
The favorable business climate during the first six months is expected to
continue for the remainder of 2000.

Sandviken, 9 August 2000

SANDVIK AB; (publ)

Clas Åke Hedström
President and CEO

Appendices:
1. Group summary

2. Invoicing and operating profit

The interim report for the first half of 2000 is unaudited. The next
interim report will be released on 2 November 2000 for the first three
quarters of 2000.

For additional information, please call +46 (0)26-26 10 01

Group in summary, SEK M
Q1-2 Full- Q1-2
year
Income statement 1999 1999 2000
Invoiced sales 19 39 300 21 360
990
Cost of goods sold -13 -26 297 -14 155
601
Gross profit 6 389 13 003 7 205
Selling, general and administrative -4 -8 485 -4 372
expenses 255
Other operating income and expenses -33 -93 57
Items affecting comparability 0 1 625 660
Operating profit 2 101 6 050 3 550
Financial income and expenses, net -290 -585 -240
Profit after financial items 1 811 5 465 3 310
Taxes -614 -1 688 -1 098
Minority interests -79 -157 -116
Net profit 1 118 3 620 2 096
Consolidated balance sheet
Fixed assets 19 18 318 18 251
353
Inventories 10 10 040 10 682
433
Current receivables 10 9 469 11 314
520
Liquid assets 1 807 2 369 1 858
Total assets 42 40 196 42 105
113
Shareholders' equity 17 20 109 20 084
632
Minority interests 821 888 820
Interest-bearing provisions and 12 8 382 10 022
liabilities 633
Non-interest-bearing provisions and 11 10 817 11 179
liabilities 027
Total provisions, liabilities and 42 40 196 42 105
shareholders' equity 113

Summary cash-flow statement
Profit after financial items 1 811 5 465 3 310
Items not affecting cash flow -2 -1 892 -472
Reversal of depreciation 1 069 2 273 1 111
Taxes paid -1 -1 524 -1 005
210
Change in working capital -924 -928 -1 484
Cash flow from operating activities 744 3 394 1 460
Investments, acquisitions and -1 1 316 -1 368
divestments 079
Cash used in financial activities, 355 -4 133 -605
changes in loans, dividends
Net cash flow 20 577 -513

Key figures
Order intake, SEK M 20 39 650 22 730
130
Earnings per share excl. items 8.15 9.00 10.70
affecting comparability, SEK*
Earnings per share incl. items 8.15 14.00 17.80
affecting comparability, SEK*

Return on net assets excl. items 14.3% 15.1% 17.4%
affecting comparability*

Return on shareholders' equity excl. 11.8% 12.4% 14.1%
items affecting comp. *
*Rolling 12 months

Invoiced sales by market area,
SEK M Q2 Q1-2 Q3 Q4 Full Q1 Q2 Q1-2 Change
-
year
1999 1999 1999 1999 1999 2000 2000 2000 % % 1)
EU (excl. Sweden) 4 8 3 3 15 3 3 7 -5 7
086 164 387 720 271 825 951 776
Sweden 637 1 461 597 2 623 616 1 4 15
191 249 239
Rest of Europe 613 1 500 499 2 628 639 1 10 9
147 146 267
Europe total 5 10 4 4 19 5 5 10 -2 8
336 502 348 816 666 076 206 282
NAFTA 2 5 2 2 9 2 2 5 10 8
645 018 493 441 952 722 817 539
South America 431 761 421 366 1 419 490 909 19 27
548
Africa, Middle 357 763 406 437 1 391 420 811 6 15
East 606
Asia, Australia 1 2 1 1 6 1 2 3 30 23
591 946 612 970 528 712 107 819
Group total 10 19 9 10 39 10 11 21 7 11
360 990 280 030 300 320 040 360

Invoiced sales by business area,
SEK M
Svk Tooling 3 6 3 3 13 3 3 7 14 9
383 709 075 393 177 818 832 650
Svk Mining and 2 4 2 2 8 2 2 4 13 12
Construction 235 336 229 243 808 248 666 914
Svk Specialty 3 6 2 3 11 3 3 6 15 14
Steels 278 011 618 342 971 319 583 902
Svk Saws and Tools 666 1 647 171 2 / / / / /
335 153
2)
Seco Tools 791 1 708 835 3 916 946 1 17 10
585 128 862
Group activities 7 14 3 46 63 19 13 32 / /
Group total 10 19 9 10 39 10 11 21 7 11
360 990 280 030 300 320 040 360

Operating profit by business area,
SEK M
Svk Tooling 665 1 634 684 2 800 770 1
279 597 570
Svk Mining and 178 293 168 213 674 209 287 496
Construction
Svk Specialty 165 288 105 240 633 267 321 588
Steels
Svk Saws and Tools 38 102 42 9 153 / / /
2)
Seco Tools 143 283 94 195 572 197 190 387
Group activities -47 -144 -39 -21 -204 -78 -73 -151
Op. profit excl.
items
affecting 1 2 1 1 4 1 1 2
comparability 142 101 004 320 425 395 495 890
Items affecting - - 1 25 1 300 360 660
comparability 600 625
Op. profit incl.
items
affecting 1 2 2 1 6 1 1 3
comparability 142 101 604 345 050 695 855 550

Operating profit by business area,
% of invoicing
Svk Tooling 20 19 21 20 20 21 20 21
Svk Mining and 8 7 8 9 8 9 11 10
Construction
Svk Specialty 5 5 4 7 5 8 9 9
Steels
Svk Saws and Tools 6 8 6 5 7 / / /
2)
Seco Tools 18 18 13 23 18 22 20 21
Op. profit excl.
items
affecting 11 11 11 13 11 14 14 14
comparability
Op. profit incl.
items
affecting 11 11 28 13 15 16 17 17
comparability
1)
Change compared with year earlier at fixed exchanged rates for
comparable units.
2)
As a result of the majority holding in Seco Tools, Sandvik
consolidates this company. For comments, refer to the company's interim
report for the six months ended 30 June 2000.