Sandvik’s Q4 2022 knocked expectations out of the park

Jan 20, 2023 | Hot Topics

Sandvik started the PLMish reporting season with a bang, reporting Q4 2022 results that beat expectations in nearly all instances. (Note that Sandvik doesn’t give exact guidance, so the numbers that were beaten were those from investment analysts. But these beats matter; they create optimism and buzz. And “knocking it out of the park” is a baseball term–it means to hit a home run, hit the ball out of the stadium, do something very well.) 

The big picture: Sandvik reported total revenue of SEK 31,094 million (SEK = Swedish Krona; this is about US$3 billion). In Krona, this was up 23%. as reported, up 11% in constant currencies (cc), and up 5% on an organic constant currency (occ) basis. Go here to read about all of the divisions, supply chain disruptions, exiting Russia, etc. — we’re going to concentrate on the manufacturing-related parts of the business.

Sandvik Manufacturing and Machining Solutions (MMS) saw stable order intake in Q4 — recall that much of the business is machine tools, so hardware businesses, which often look at order intake to measure future revenue potential — in most regions but “weaker development was noted in Asia where China was impacted by the volatile covid situation”. Excluding Russia, Q4 organic order intake was up 2%, a trend that continued into January. Revenue was up 5% cc “driven primarily by automotive (which saw double-digit growth in daily order intake in North America and Europe) and energy … The development within general engineering was stable, [with] lower volumes offset by [higher] pricing … aerospace was down in all regions but Europe, on tough comparables”. 

Putting all of that together, SMM revenue was up 2% occ in Q4, with another 7% from acquisitions, for a total of 9% cc growth (or up 20% as reported) to SEK 11,954 million. For the year, total revenue was SEK 45,901 million, up 25% as reported.

The company also gave small updates of what some of the SMM brands have been up to recently: 

  • Cambrio launched new 2023 CAD/CAM software versions for all brands which contributes to ~50% cycle time reduction, and significant tool life increase. 
  • SigmaNEST V23 continues to close the loop in manufacturing connectivity for optimization of part processing and workflows.
  • GibbsCAM 2023 features significant turning enhancements including effective implementation of Sandvik Coromant’s PrimeTurning. 
  • Cimatron V16 delivers process optimization, usability and new technology to allow toolmakers to manufacture higher quality tools faster, easier and more efficiently. “

I don’t usually cover this kind of new release info because it’s all company-speak, but it’s easy for us to forget what Sandvik has built with its acquisitions plan: a broad CAM portfolio across many manufacturing modalities, industries, and geos. Highlighting individual brands this way shows that Sandvik continues to invest to grow the brands as well as build points of intersection.

All of this leads Sandvik CEO Stefan Widing to be somewhat optimistic about 2023. He sees the current situation as volatile, between wars, pandemics, supply chain, and other challenges, but believes Sandvik is up to the task. After all, 2022 was just as challenging. He said there are “good backlogs” in many parts of the business, which will lead to revenue as they are drawn down; looming recoveries in auto and aero; easing of supply chain issues — all positives for Sandvik in general. One interesting comment, that I think was made in reference to  SMM in 2023: Aerospace and other industries pushed out production forecasts because of those lingering supply chain issues. As these problems resolve, SMM should see an even greater uptake as manufacturing ramps back up. If that holds, it’ll be good for everyone in our PLMish world.

Mr. Wilding doesn’t typically quantify software revenue, but it was a key part of the growth picture he painted for SMM. He said that growth has been “strong, ahead of the market”, with Sandvik using its mass to improve brand margins — but nothing was quantified.

So, a strong Q4 at Sandvik SMM and a positive start 3 weeks into a new year. 

That’s a good start to PLMish earnings. Reports pick up next week and then crank into higher gear the following week.