Sandvik, the Swedish company that has been snapping up CAM vendors, announced first quarter results today:

• Revenue in Q1 was SEK 24,921 million (about $2.6 billion at today’s exchange rate), up 35% as reported and up 27% in constant currencies (cc) (meaning, excluding the effect of exchange rate changes). On an organic basis, excluding the raft of acquisitions the company has done in the last twelve months, revenue was up 9% *
• Focusing on the part of the business we care most about, company CEO Stefan Widing said that “[d]emand within Sandvik Manufacturing and Machining Solutions continued on a positive trajectory driven by North America and Europe … general engineering and aerospace showed double-digit growth and organic order intake was up 6% … our acquisitions are delivering well in line with expectations and growth in order intake was a strong 19%, with many new CAM licenses delivered from Sandvik Manufacturing Solutions.”
• Orders from the automotive vertical were down year on year, but improved sequentially, “with semiconductor shortages in the industry having an impact on the general demand picture,”
• Q1 revenue for Sandvik Manufacturing and Machining Solutions was SEK10.9 billion (about $1.2 billion), up 24%. Keep in mind that this contains a lot of revenue acquired over the last 12 months, so this isn’t a sustainable growth rate*
• By geo, Manufacturing and Machining Solutions revenue from Europe was SEK 5.5 billion, up 7%; from North America, SEK 2.9 billion, up 15%; from South America, SEK 229 million (up 11%); from Africa/Middle East, SEK 91 million, up 22%; from Asia, SEK 2.1 billion, down 6%; and from Australia, 68 million, up 2%.
• The company said that it saw a “continued positive demand trend with all segments improving sequentially from the 4th quarter, and good traction within CAM”. That sequential growth seems to be continuing into the first few weeks of April
• Sandvik doesn’t break out any metrics by brand but Mr. Widing did tell investors that “the Mastercam brand performed exceptionally well, and is clearly taking market share in terms of new license sales”

*I am often asked about “organic” and “constant currency” metrics — why clutter up an already confusing mashup of numbers? I add this where I can because it sometimes offers a different perspective on a company’s earnings announcement. If organic growth is strong, for example, that’s an important piece of data about the company’s traditional products. Similarly, if the growth appears to be mainly due to exchange rate fluctuations, is it real growth? Perhaps not. We need to keep in mind that earnings reports are marketing exercises directed at investors, not buyers of the company’s products. They disclose what’s required by regulators and what makes a company look like an attractive investment. Interpret this stuff with care and use all available data to make your inferences.

My inferences about Sandvik? The company made 13 acquisitions during the last 12 months; 7 in the Manufacturing and Machining Solutions business. Included in those 7 are CNC Software (aka Mastercam) and ICAM, both software businesses; the rest are mostly tooling and metrology solutions for the Machining part of the business. That’s a lot to manage at the corporate level but Sandvik seems (smartly) to be leaving these acquisitions alone to continue to do the things that made them successful standalone businesses, but with more backing and support.

Russia’s invasion of Ukraine, the sanctions many nations imposed, and their effects on the general business climate will be a talking point for all companies this earnings season. Russia accounts for a single-digit proportion of revenue for most of our publicly-traded PLMish companies, so the revenue impact of exiting business there might not be noticeable for a while, though getting out of office leases, furloughing staff, and other costs might show up a lot sooner.

Sandvik says that less than 4% of revenue in 2021 came from Russia and that it “paused” its business activities there on February 28th. Q1 sanctions led to a “negative impact” on order intake, and likely no new revenue from March (the company didn’t spell this out). In a worst-case scenario, Sandvik could take as much as a 4% revenue hit due to lost business from Russia, depending on how long that “pause” lasts — but the company is still working to quantify the risk from an accounting perspective.

I expect we’ll hear similar statements from all of our vendors over the next month or so.

Sandvik says it saw no change in business after the start of the war. Mr. Widing told investors: “The regional development has not changed in any material way post the war’s start. It’s not that Europe declined after that, but was stronger before that. China was down year-over-year, but improved slightly towards the end [of Q1] and going into April… In a way, relatively uneventfully is my main takeaway. It’s steady improvement.”

That’s fascinating and I want to hear what other vendors say. The media is so full of pain, gloom, and destruction. Those are all too real and capture our attention but here’s another perspective: even in the face of that horror, other things in the world tick on.**

Sandvik doesn’t offer guidance but is holding a Capital Markets Day in May, so perhaps we’ll get a clearer picture of what the company expects, now that more of its revenue comes from software.

**But we can’t turn away. We can do many things at once — tend to business and help those who are displaced or otherwise affected simply because of where they live. I’ve continued to be impressed by the work of World Central Kitchen, serving food with dignity to Ukrainians in Ukraine and in the many places they have fled to — as well as supporting other parts of the world where natural or man-made crises have created hunger. If you can help, please do.