Sandvik AB History
Telephone: (26) 26 00 00
Fax: (26) 26 10 22
Incorporated: 1868 as Sandvikens Jernwerks Aktiebolag
Sales: SKr 42.40 billion (US$5.23 billion) (1998)
Stock Exchanges: Stockholm London
NAIC: 331210 Iron and Steel Pipe and Tube Manufacturing from Purchased Steel; 331221 Rolled Steel Shape Manufacturing; 331222 Steel Wire Drawing; 331421 Copper Rolling, Drawing, and Extruding; 331491 Nonferrous Metal (Except Copper and Aluminum) Rolling, Drawing, and Extruding; 331513 Steel Foundries (Except Investment); 332212 Hand and Edge Tool Manufacturing; 332999 All Other Miscellaneous Fabricated Metal Product Manufacturing; 333120 Construction Machinery Manufacturing; 333131 Mining Machinery and Equipment Manufacturing; 333512 Machine Tool (Metal Cutting Types) Manufacturing; 333515 Cutting Tool and Machine Tool Accessory Manufacturing
Sandvik shall contribute actively to improving the productivity and profitability of its customers. Products and services offered by the Group shall provide customers with maximum value in terms of performance, quality, speed, safety, flexibility and total economy. Sandvik shall be the obvious first choice for customers. Operations shall be concentrated primarily in niche sectors where Sandvik is-or has the potential to become--a world leader. Key Dates:
- Göran Fredrik Göransson forms Högbo Stål & Jernwerks AB to build a new steelworks at Sandviken, Sweden.
- Company is declared bankrupt.
- Sandvikens Jernwerks Aktiebolag is founded in May 1868, with Anders Henrik Göransson, son of the founder, as general manager.
- Karl Fredrik Göransson, grandson of the founder, becomes managing director.
- Company enters the cemented-carbide trade.
- Company goes public through an issue of shares; investment company Kinnevik acquires stake in the company.
- Hugo Stenbeck, chairman of Kinnevik, becomes company chairman; Arne Westerberg, formerly of Kinnevik, becomes managing director.
- Sales of cemented-carbide products exceed those of steel products for the first time.
- Company changes its name to Sandvik AB; the U.S. rock drilling manufacturing operation of Fagersta is purchased.
- Skanska AB acquires Kinnevik's holding and builds up a 37 percent stake in the company; Percy Barnevik, chief executive of ASEA AB, is appointed chairman.
- Company's operations are restructured into six core business areas: Sandvik Tooling, Sandvik Rock Tools, Sandvik Hard Materials, Sandvik Steel, Sandvik Saws and Tools, and Sandvik Process Systems.
- The Carboloy Division of General Electric Company is acquired.
- Per-Olof Eriksson is named president and CEO; Skanska's holding stands at 26 percent.
- Bahco Tools Group is acquired and added to Sandvik Saws and Tools.
- Company completes acquisition of CTT Tools from AB SKF.
- Clas Åke Hedström takes over as president and CEO.
- Sandvik takes full control of Tamrock, Kanthal, and Precision Twist Drill; Skanska sells the bulk of its stake in Sandvik, with large portion sold to AB Industrivärden.
- Company's operations are concentrated around three core business areas: Sandvik Tooling, Sandvik Mining and Construction, and Sandvik Specialty Steels; Sandvik Saws and Tools unit is sold to Snap-On Incorporated.
Sandvik AB is an industrial engineering group based in Sandviken, Sweden, and trading through an international network of 300 companies in 130 countries. About 94 percent of Sandvik's sales are from outside Sweden, with 39 percent stemming from European Union countries (other than Sweden), 25 percent from North America (including Mexico), and 15 percent from the Australasian region. Originating from a steelworks using the Bessemer method in the 1860s, the company has developed into a group with three main business units, each of which holds world-leading positions in several niches. Sandvik Tooling specializes in tools and tooling systems for metalworking applications, with Sandvik Coromant holding the global lead in the manufacture of cemented-carbide tools and CTT Tools also leading the world in the manufacture of high-speed steel tools. Sandvik Mining and Construction is a leading global supplier of rock-working equipment, tools, and services for mining and civil engineering. Sandvik Specialty Steels is principally comprised of Sandvik Steel, a world leader in the manufacture of products made of stainless steel and of titanium, nickel, and zirconium alloys; and Kanthal, a world leader in the production of metallic and ceramic resistance materials in the form of wire, strip, and electric heating elements.
The origins of Sandvik can be traced back to the formation of the Högbo Stål & Jernwerks AB in 1862. The company was set up to build a new steelworks at Sandviken--150 miles north of Stockholm, the capital of Sweden--by Göran Fredrik Göransson. Sandvik claims that Göransson, who obtained a license to use the Bessemer process, was the first to get the new process to work on an industrial scale. The Bessemer method, unlike earlier methods, allowed the production of heavy castings and forgings in one piece from one melt. In the process, air is blown through molten pig-iron and a vigorous combustion results from the reaction of the blast and the hot iron in the converter. Sandviken is located in the southeastern corner of the region of Sweden where iron products had been produced for hundreds of years prior to the formation of the new company. The original iron industry was based on local deposits of iron and the ready availability of wood to make charcoal.
Johan Holm, the main financial backer of Göransson's company, however, got into financial difficulties that resulted in his and the company's downfall. The company was declared bankrupt in 1866; after financial restructuring, Sandvikens Jernwerks (Steelworks) Aktiebolag was founded in May 1868. Anders Henrik Göransson, the son of the founder, became the manager of the new company and set Sandvik on the course that would lead to its future success. By international standards, Sweden offered a small home market for the new company. From the start Sandvik exported products which, because of the company's location far from the main industrial markets, had to be highly upgraded steel products. The high quality of Swedish iron ore and the Bessemer process urged the company in the same direction. Even during the first years of the new company, Anders Göransson traveled widely in Europe, taking orders for products and establishing agencies.
By the 1890s the company was making some manufactured products, such as saws, from the steel it produced. In the latter part of the 19th century, the company's specialties included boiler tubes for installation in steamships and railway engines, rock drilling steels, and wire for umbrellas. By the outbreak of World War I, exports accounted for up to 80 percent of Sandvik's output.
By 1914 employment at Sandviken exceeded 2,200. During World War I the export share shrank, but was offset by the booming domestic market for steel. During the interwar period the company was hit hard by recession, in the early 1920s and again in the early 1930s. The workforce declined, but by 1937 had risen again to 5,380. During this period, the production of steel by the open-hearth process and electro process replaced the Bessemer process that had been instrumental in the foundation of the company. Sweden's cheap hydroelectric power provided an advantage for steelmakers using the electro process.
Between 1918 and 1939 exports as a proportion of sales varied between 60 and 70 percent. Throughout this period, steel was the dominant product group; manufactured products such as saws, conveyor belts, complete conveyors, and razor blades accounted for only six percent of sales. Within the area of steel products, tube products were increasingly important; these included seamless stainless tubes for the food, pulp and paper, and chemical industries.
From 1920 until 1958 the dominant figure in the company was Karl Fredrik Göransson, grandson of the company's founder. When he returned to Sweden in 1901 after studying in the United States, he brought with him the company's, and probably Sweden's, first microscope for metallurgical studies. He was managing director from 1920 until 1948 and chairman from 1929 until 1959.
By the beginning of World War II, Sandvik's production amounted to 90,000 tons of steel ingots a year and 65,000 tons of finished products. In terms of ingots, the company accounted for about ten percent of Sweden's output, but because the final products were highly upgraded this understates the company's relative importance in terms of the value of output. During World War II, exports collapsed again and output was diverted to the home market. During this period, however, an event of immense importance for the development of the company occurred.
Increasing Importance of Cemented-Carbide Products: 1940s-60s
In 1941 the company decided to enter the cemented-carbide trade. Cemented-carbide is a powder-metallurgical product of which tungsten carbide is the main constituent. It may also contain carbides of other metals such as titanium, tantalum, and niobium. Powders prepared from the various metal carbides are mixed with fine-grained powdered metal, most commonly cobalt. The mix is pressed to the desired shape and is treated at a high temperature; the cobalt melts and functions as a binding agent for the carbide grains which are sintered in. The sintered product has multiple advantages: hardness, ductility, and resistance to wear. A sintered blank can be ground to high edge sharpness, affixed to a holder, and used as a tool for metal cutting.
Fried. Krupp AG, the German steel and engineering company (which was later subsumed into Thyssen Krupp AG), had invented cemented-carbide tools in the 1920s and was the leading supplier before World War II. The war separated Krupp from many of its markets and provided opportunities for new entrants to the trade.
Sandvik used the name Coromant for its new venture, which was initiated by production manager Carl Sebart. Previously, cemented-carbide had been sold in the form of blanks to be fashioned and sharpened into tools by the users. Sandvik's new approach, to supply ready-made tools, was first applied to rock-drills, which were developed and marketed in collaboration with Atlas Copco AB, another Swedish company, and were an immediate success. The cooperative arrangement with Atlas Copco continued until 1988. Michael Porter, author of The Competitive Sources of Power, suggested that one reason for Sweden's success in producing internationally competitive rock drilling equipment is that its rock is among the hardest in the world. Cemented-carbide metalworking tools were slower to achieve popularity, but development after 1956 was rapid. Sandvik Coromant expanded by building new factories in Sweden and other countries and by acquiring existing producers. Wilhelm Haglund, who had managed the development of Sandvik's cemented-carbide operation from the start in 1941, was appointed managing director of Sandvik in 1957 by K.F. Göransson, and held the position until 1967.
The Göransson family was the company's major shareholder and controlled Sandvik until 1957, when additional capital was raised by an issue of shares, and the investment company Kinnevik acquired a stake in the company. In 1967 Hugo Stenbeck, chairman of Kinnevik, became chairman of Sandvik, and Arne Westerberg-a former manager of a subsidiary of Kinnevik&ndashøok over as managing director.
An important change of corporate strategy occurred in 1967 at about the time of the changeover in management from Wilhelm Haglund as managing director and Gustaf Söderlund as chairman to Hugo Stenbeck and Arne Westerberg, respectively. Hitherto, the company's policy had been to market products made by the parent company or by its subsidiaries starting from products made by the parent company. Between 1962 and 1966, parent company sales represented 78 percent of group sales. From 1967 more products, particularly cemented-carbide products, were manufactured by the company's overseas subsidiaries.
In 1971 sales of cemented-carbide products exceeded those of steel products for the first time. In 1972 this was acknowledged by a change in the company's name from Sandvikens Jernwerks Aktiebolag to Sandvik AB.
Expansion Through Acquisition: 1970s-80s
Sandvik's other divisions were also making progress in developing products and markets while the carbide-tool business took off; they certainly could not afford to be idle in the intensely competitive environment of the steel and engineering industries during the 1970s and 1980s. While other steel companies faced repeated if not terminal crises, Sandvik succeeded as a result of its policies of investment in the latest technology and by developing specialty products to be sold in world markets. In world terms, Sandvik was a small-scale producer of steel; it survived in spite of the existence of large economies of scale for steel production by concentrating on the production of types of specialty steel and making high quality special products, such as surgical needles, scalpels, and probes that require special strength and resistance to corrosion, bone pins, artificial hip-joints, cladding in nuclear reactors, and springs.
The pace of expansion through acquisitions in Sweden and abroad was stepped up after 1967. In 1968 a joint venture, the Saeger Carbide Corporation, was set up in the United States with the Greenleaf Corporation. Between 1970 and 1973, manufacturers of rock drilling equipment in France and Spain were acquired. In 1972 the U.S. rock drilling manufacturing operation of another Swedish steel company, Fagersta, was purchased. In 1973 the U.K.-based Wickman-Wimet group was acquired, and during 1978 and 1979 tool manufacturers in Germany and France were bought. Between 1971 and 1974 the steel division made acquisitions in Spain, West Germany, and the United Kingdom; saw, hand-tool, and conveyor manufacturers were also taken into the group.
Although it was better placed than many other Swedish steel producers, Sandvik took part in the successive rationalizations of the Swedish special steels industry during the early 1980s. The result of the rationalizations was that there were only two principal special steel manufacturers in Sweden--Sandvik and Avesta--with Sandvik specializing in strip, wire, and tube products.
Following the second oil crisis in 1980, Sandvik suffered from the effects of the recession in many of its major markets. In 1983 the company's profits were reduced by Skr 219 million (US$30 million) owing to an exchange rate loss brought about by unauthorized foreign-exchange speculation by an employee. In the aftermath of this disaster, Skanska AB, a construction company with diversified interests, acquired Kinnevik's holding and built up a 37 percent stake in Sandvik. In October 1983 Percy Barnevik, the chief executive officer of the Swedish electrical giant ASEA AB, was appointed chairman of Sandvik in succession to Arne Westerberg. In 1984 Per-Olof Eriksson was appointed president. In 1989 Percy Barnevik remained chairman while Per-Olof Eriksson became president and CEO of Sandvik, and Skanska AB controlled 26 percent of shareholders' votes. Meantime, in 1984 the company restructured its operations into six core business areas: Sandvik Coromant, Sandvik Rock Tools, Sandvik Hard Materials, Sandvik Steel, Sandvik Saws and Tools, and Sandvik Process Systems.
Acquisitions continued to be made during the 1980s. An important one was the Carboloy Division of the General Electric Company, of the United States, in 1987. In 1989 Metinox Steel Ltd., a small U.K. company making medical products out of stainless steel, was acquired.
During the years 1987 to 1989, Sandvik's operating profit--after charging depreciation--represented more than 15 percent of sales. Expenditure on research and development was more than four percent of sales while capital expenditure averaged more than five percent of sales.
Strengthening and Focusing on Three Core Areas: 1990s
The early 1990s were difficult years for Sandvik as recession gripped much of the world from 1990 through 1993. Despite declining sales, the company remained profitable thanks to management's heeding signs of the downturn as early as mid-1989. Eriksson began cutting staff around the world, reducing the workforce by 20 percent by the end of 1992. He also held off on making any significant acquisitions in 1989 or 1990, returning the company to its more acquisitive nature starting in 1991--but at a slower pace than in the past. During 1991 Sandvik spent SKr 358 million to acquire ten enterprises in whole or in part. The largest of these was the December purchase of the Bahco Tools Group, which had annual revenue of SKr 700 million and about 1,700 employees. The addition of Bahco bolstered Sandvik Saws and Tools. In late 1992 and early 1993 Sandvik acquired CTT Tools from AB SKF in a two-step transaction. CTT Tools-which was formed in 1990 through the merger of SKF Tools and the German firm Günther & Co.--was the world leader in the manufacture of high-speed steel tools for metalworking, such as drills, thread-cutting tools, milling cutters, and reamers. CTT Tools and Sandvik Coromant were grouped into a new Sandvik Tooling business area.
In 1993 Sandvik formed a subsidiary in China, Sandvik China Ltd., which began construction of a cemented-carbide tools factory in Langfang City. The following year Eriksson turned over the reigns to a new president and CEO, Clas Åke Hedström. In February 1994 Sandvik reached an agreement to acquire the cemented-carbide operations of Krupp Widia GmbH (the original producer of cemented-carbide products) from Fried. Krupp AG Hoechst-Krupp. German antitrust authorities, however, concluded that Sandvik would gain too dominant a position in particular product segments of the German market and squelched the deal.
From 1993 through 1995 Sandvik recorded steadily rising revenues and profits as the business climate was generally favorable worldwide. With the late 1990s difficulties experienced in Japan, other parts of Asia, Russia, and Latin America, net profits declined from SKr 3.73 billion in 1995 to SKr 2.10 billion in 1998. Revenues, however, moved in the opposite direction, increasing from SKr 29.7 billion to SKr 42.4 billion during the same period, aided by several major acquisitions. During 1997 alone, Sandvik took full control of Tamrock, Kanthal, and Precision Twist Drill. Finland-based Tamrock, which Sandvik acquired in two phases in 1996 and 1997, was a world-leading maker of rock-drilling equipment. The three main operations of Tamrock were combined with Sandvik Rock Tools to form a new Sandvik Mining and Construction business area. This area included four separate business sectors: the newly named Sandvik Tamrock, producer of drilling rigs, loaders, trucks, hydraulic hammers, and cemented-carbide products; Voest-Alpine Eimco, maker of equipment and tools for the mining of coal and other soft minerals; Driltech Mission, maker of drilling rigs and cemented-carbide tools for rotary and down-the-hole drilling; and Roxon, provider of equipment for conveyors and systems for handling of bulk materials.
Also acquired in two steps in 1996 and 1997 was Kanthal AB, a leading maker of high-temperature metallic and ceramic materials in the form of wire, strip, and electric heating elements. Kanthal had strong ties to Sandvik Steel and the two units were grouped within a new business area called Sandvik Specialty Steel. In September 1997 Sandvik acquired Crystal Lake, Illinois-based Precision Twist Drill Co. for SKr 1.06 billion. With annual sales of more than US$110 million, Precision was one of the leading manufacturers of high-speed steel twist drills in the world. It became part of CTT Tools.
In mid-1997 Skanska sold the bulk of its significant holding in Sandvik. Skanska sold part of its stake to AB Industrivärden, a Swedish investment company that held an 11.7 percent voting stake at the end of 1998. In April 1999 Sandvik announced that it would sell Sandvik Saws and Tools to Kenosha, Wisconsin-based Snap-On Incorporated. The SKr 3.3 billion (US$400 million) deal was completed in September of that year, with Sandvik recording a capital gain of about SKr 1.6 billion. Sandvik Saws and Tools was renamed Bahco Group AB and continued to be based in Sandviken, Sweden. With this divestment pending, Sandvik in May 1999 announced that it would restructure its operations into three main areas. The first was Sandvik Tooling, which continued to include Sandvik Coromant and CTT Tools and also gained Sandvik Hard Materials, producer of cemented-carbide blanks, components, and rolls. The second was Sandvik Mining and Construction. And the third was Sandvik Specialty Steels, which comprised Sandvik Steel and Kanthal as well as the newly added Sandvik Process Systems, maker of steel belts and steel-belt-based process plants. Sandvik was now well-positioned for the 21st century, as Sandvik held leading global positions in specific niches within each of these areas.
Principal Subsidiaries: Dormer Tools AB; Dropler High Tech AB; Ecocat AB; Edmetson AB; Fragoso AB; Guldsmedshytte Bruks AB; Gusab Holding AB; Gusab Stainless AB; AB Sandvik Belts; AB Sandvik Calamo; AB Sandvik Coromant; Sandvik Coromant Norden AB; AB Sandvik Falken; Sandvik Far East Ltd. AB; AB Sandvik Hard Materials; Sandvik Hard Materials Norden AB; AB Sandvik Information Systems; AB Sandvik International; Sandvik Invest AB; AB Sandvik Powders; AB Sandvik Process Systems; AB Sandvik Rock Tools; Sandvik Rock Tools Svenska Försäljnings AB; AB Sandvik Service; AB Sandvik Steel; Sandvik Stål Försäljnings AB; AB Sandvik Teknik; AB Sandvik Tranan; AB Sandvik Västberga Service; Sandvik Örebro AB; AB Sandvik Örnen; ZP Sandvik (Belarus); Dormer Tools S.A. (Brazil); Sandvik do Brasil SA. (Brazil); Sandvik China Ltd.; Sandvik International Trading (Shanghai) Co. Ltd. (China); Sandvik Colombia S.A.; Sandvik CZ s.r.o. (Czech Republic); Sandvik GmbH (Germany); Sandvik Holding GmbH (Germany); Sandvik A.E. Tools and Materials (Greece); Sandvik KFT (Hungary); Sandvik Asia Ltd. (India; 73%); Sandvik Choksi Ltd. (India; 51%); CML Handling Technology S.p.A. (Italy); Sandvik K.K. (Japan); Sandvik Kenya Ltd. (96%); Sandvik Korea Ltd.; Sandvik Méxicana S.A. de C.V. (Mexico); Sandvik Maroc S.A. (Morocco; 94%); CTT Cutting Tool Technology B.V. (Netherlands); Sandvik Benelux B.V. (Netherlands); Sandvik Finance B.V. (Netherlands); Sandvik del Perú S.A.; Sandvik Baildonit S.A. (Poland); Sandvik Polska Sp.z. o.o. (Poland); Sandvik Portuguesa Lda (Portugal); Sandvik Slovakia s.r.o.; Minas y Metalurgia Espanola SA (Spain); Sandvik Endüstriyel Mamüller Sanayi ve Ticaret A.S. (Turkey); Sandvik (Zambia) Ltd.; Sandvik (Private) Ltd. (Zimbabwe).
Principal Operating Units: Sandvik Tooling (including Sandvik Coromant, Sandvik CTT, and Sandvik Hard Materials); Sandvik Mining and Construction (including Sandvik Tamrock, Voest-Alpine Eimco, Driltech Mission, and Roxon); Sandvik Specialty Steels (including Sandvik Steel, Kanthal, and Sandvik Process Systems).
Principal Competitors: Atlas Copco AB; Boart Longyear Group; Bridgeport Machines, Inc.; Carpenter Technology Corporation; Flow International Corporation; Furukawa Co., Ltd.; Greenfield Industries, Inc.; Harnischfeger Industries, Inc.; Ingersoll-Rand Company; Joy Mining Machinery; Kennametal Inc.; Long-Airdox Company; Mannesmann AG; Milacron Inc.; Mitsubishi Steel Mfg. Co., Ltd.; Nippon Steel Corporation; The Stanley Works; Sumitomo Metal Industries, Ltd.; Thyssen Krupp AG; Toshiba Corporation.
- Aronson, Robert B., 'Journey to Sweden,' Manufacturing Engineering, July 1998, pp. 134-38.
- Burt, Tim, 'Snap-On Buys Sandvik Unit,' Financial Times, April 23, 1999, p. 31.
- Garnett, Nick, 'Carbide Tool Groups Sharpen Up Their Image,' Financial Times, April 6, 1988.
- Hedin, Göran, Ett Svenskt Jernwerk, Sandviken, 1862-1937, Uppsala: [n.p.], 1937.
- McIvor, Greg, 'Skanska to Sell Its Holding in Sandvik,' Financial Times, April 15, 1997, p. 27.
- Reier, Sharon, 'Against the Tide,' Financial World, May 10, 1994, pp. 48-49.
- 'Sandvik, Inc. to Acquire Precision Twist Drill,' Industrial Distribution, August 1997, pp. 16, 23.
- Shutte, Lesley, 'Sandvik Shows Its Metal,' Director, December 1996, pp. 54-58.
Transformation: Sandvik, 1862-1987, Sandviken: Sandvik AB, 1987.
- Wright, Chris, 'Sandvik Ready for the Increase in Competition,' Corporate Finance, January 1999, p. 29.
Source: International Directory of Company Histories, Vol. 32. St. James Press, 2000.