Definition Return on Capital Employed ROCE KAGroup Business

Definition Return on Capital Employed (ROCE) KA/Group Business Control

Document Information l l l Title: Definition Return on Capital Employed Description: Responsible: KA/Anders Östling Valid as of: 1 September 2010 Reviewed: 1 September 2012 page 2

ROCE Tree Internal focus Financial steering Growth Sales EBIT Profitability Costs ROCE Fixed assets Capital efficiency CE WC EBIT/Capital Employed = ROCE page 3

ROCE Follow up l ROCE is calculated on consolidated levels only in order to exclude effects from transfer pricing ü Sandvik Group ü Business Area ( BA) ü Product Area (PA) l ROCE is calculated on a quarterly basis only since monthly closings do not encompass a full balance sheet ü Actual – quarterly and year to date ü Forecast – quarterly and year to date page 4

ROCE Calculations l ROCE is calculated both on a 12 -month rolling period and on an annualized three months result ü ü l 12 -month rolling ROCE is the official KPI, used in the CEO-comment and Interim report The 3 -month ROCE might be used quarterly to analyze current trends 12 months ROCE ü ROCE = EBIT 12 month back Average capital employed Where average capital employed is calculated as CB 5 quarters back Example: Calculation of ROCE Q 3 2010 = EBIT Q 4 2009 - Q 3 2010 Average capital employed (Q 309, Q 409, Q 110, Q 210, Q 310) l 3 months ROCE ü ROCE = EBIT Q*4 Average capital employed Where average capital employed is calculated as: (OB actual quarter + CB actual quarter)/2 Example: Calculation of ROCE Q 3 = EBIT Q 3*4 (OB Q 3 + CB Q 3)/2 OB=Opening Balance CB=Closing Balance page 5