OBJECTIVES

Business concept, goals and strategies

Sandvik is a global engineering Group whose offering includes products, services and support that improve customer productivity and profitability. To achieve long-term success, Sandvik has an advanced holistic approach that covers financial, environmental and social responsibility. Assuming an active role in addressing sustainability issues also characterizes cooperation with customers and suppliers. Founded in 1862, Sandvik is a world-leading company in the engineering industry. From the very beginning, the company has distinguished itself through high-technology development, with a focus on metallurgy and materials technology. Throughout the years, the direction of the company has varied depending on historical technology shifts and the needs of the industry and society at various points in time. Sandvik manufactures advanced engineering tools, mining equipment and products in high-alloy materials. Sandvik holds, or has the potential to establish, world-leading positions in all of the market segments in which it operates. A business concept that strengthens customer competitiveness Sandviks business concept is to develop, manufacture and market hightech products and services that facilitate higher customer productivity and profitability. Sandviks long-term strategy is based on creating an interaction between the Groups strengths, such as advanced and broad-based R&D, high value-added products, in-house manufacturing, efficient logistics systems, financial strength, a well-established approach to sustainability and a strong corporate culture. Management by objectives Sandvik has a number of customer-oriented, financial, social and environmental objectives. Management by objectives is pursued in a decentralized manner and contains both short and long-term goals. The objectives are broken down into a number of targets that are adapted to the various levels in the

organization. Read more about the objectives of the Groups sustainability work or at www.sandvik.com. Overall financial goals The overall financial goal is based on the Groups world-leading positions in various business areas. The long-term goal for Sandviks organic growth is 8%, compared with the estimated underlying average market growth over the same period of 46% in Sandviks areas of activities. The goal is based on: Increased market shares in current and new markets. New products. New application areas with high growth potential. The goal for return on capital employed in existing operations is 25% for the Group as a whole. The various business areas encounter differing commercial conditions and they have thus been assigned specific intermediate goals. Specialized and decentralized organization Sandvik is a global engineering Group with a decentralized organization. Decisions regarding operational activities are carried out within the Groups three business areas, all of which have specialist expertise in various technological areas, as well as deep insight into customer requirements and processes. Long-term approach and shareholder value The Groups long-term objective is to create value for its shareholders. Sandvik has achieved in average of about 7% annual growth over the past 20 years half of which through organic growth and half through acquisitions. In the past five years, the total return on an investment in Sandvik shares has averaged 15% annually. Research and development Comprehensive and goal-oriented research and development is a prerequisite for growth. Each year, Sandvik invests approximately SEK 3 billion in R&D. More than 2,400 employees work in the area and activities are often pursued in close cooperation with customers. The Group has some 5,000 active patents and other intellectual property rights

that are owned and managed by a separate company to maximize value creation. Advanced logistics Efficient inventory management and advanced logistics enhance the reliability of supplies and ensure excellent customer service. Sandviks distribution system is based on a small number of large and strategically sited warehouses in the largest market areas. This means that the Group can ensure rapid deliveries and maintain a broad product offering. World-class manufacturing Sandviks production organization is integrated with R&D activities and maintains world-class efficiency. This creates favorable potential for the continuous and rapid launch of products, which is a major competitive advantage for the Group. Transparent corporate governance Effective and transparent corporate governance builds trust among Sandviks various stakeholders and creates a distinct focus on customer and shareholder value. Corporate governance clearly defines the roles and responsibilities of shareholders, the Board of Directors and Group Executive Management. It also covers the Groups control and management systems. Sustainable development Issues relating to sustainable development are assigned priority at Sandvik. The Groups focus on enhancing efficiency in customer operations contributes to sustainable development, since it means that a growing number of companies endeavor or are given the opportunity to effectively utilize their resources. Sandvik shall also maintain a high level of ethics and be a good global corporate citizen. The Groups Code of Conduct includes guidelines for the environment, health, safety and social responsibility. Management by objectives and preventive programs are important foundation pillars in efforts to achieve continuous improvements. The Code of Conduct applies to all units and employees. It includes rules and guidelines for record keeping and accounting, business ethics, working conditions, and environmental and social commitments. The Code of Conduct forms the basis for Sandviks management system and helps to continuously improve the Groups

financial, environmental and social performance. Each manager in the Group is responsible for ensuring compliance with the Code. At the same time as Sandviks sustainability work generates positive leverage for customers and the external environment, it is also important that Sandviks suppliers share its values. Sandvik has thus prepared a Code of Conduct for its suppliers and similar stakeholders. Long-term acquisition strategy Company acquisitions are part of Sandviks long-term growth strategy to strengthen and advance positions in the Groups priority areas. Acquired operations add new products and new know-how, strengthen the existing offering, provide entry into new markets and create the potential for an even stronger presence in markets with high growth and favorable profitability. The Group has completed some 40 company acquisitions over the past ten years. Sandvik continuously analyzes possible acquisition candidates in its various areas of operations. At the same time, assessments are made regarding the possible divestment of operations that do not comprise part of the Groups areas of core strategic directions.

MANAGEMENT OF COMPANY
A company where everyone recognizes the importance of sales and consciously supports the sales process, the sales representatives have the full support of the organization and service representatives to deliver goods and services in a manner that exceed the customers' expectations. Term used to describe field sales forces that are not employees of the companies which provide the products or services they sell, sometimes known as ammo, independent marketing organization.

The Importance of Organization Structure and Processes in Effective Sales Strategy

We know that the sales process can be improved by taking a more holistic view of the sales function and applying some of the process re-engineering techniques that have proven to be effective over the last decade. This includes assessing and aligning all aspects of the sales operation in the context of the overall sales process to derive maximum sales efficiency and effectiveness for the enterprise. Frank Lynn & Associates' sales process improvement technique, known as the Sales Force Effectiveness (SFE) Program, is built around four components that are addressed from the top down, in order of strategic importance, beginning with the sales strategy. This article builds on our previous discussion of sales force effectiveness and the importance of a solid strategy by discussing the need to align the sales organization, and sales and management processes with the sales strategy. Structure and process alignment are where most organizations fail in their attempts to maximize go-to-market efforts. While they develop great strategies, they often try to fit an existing structure and process to the new strategy and ultimately fail to realize any benefits. The organization structure and processes must be aligned to the strategy in order to achieve meaningful, long-term benefits. Organization Structure and Alignment A solid organization structure provides the framework to deliver upon the

sales strategy. Therefore, once you have created a sales strategy, including clearly defined customer segments and a "clear and compelling" strategic sales message, it's important to assess whether you have the right sales organization structure. Key considerations should include: Interaction with customer segments. You need to determine if your sales organization has the right go-to-market structure to maximize interaction with each customer segment. Considerations should include the activities that are essential for success with each segment (i.e., interest creation, purchase, post-purchase, applications support, etc.) and what the best sales channels are to conduct the essential work with each segment (i.e., telemarketing calls, direct sales, distributors, etc.) Structure. Whether to structure the sales force around product lines, geography or industries is another key decision. And after choosing a structure, you need to make sure everyone involved in the sales process (global and national account managers, outside and inside sales reps, applications engineers, technical support personnel) is aligned with the organization structure and clearly understands their roles and responsibilities. That usually means linking everyone's compensation and performance measures, to some degree, to successfully fulfilling their sales process responsibilities whether they have a solid line or dotted line reporting relationship to the sales operation. Sales processes. The sales process needs to maximize time spent on value added activities such as finding, qualifying, selling, closing, and servicing. If elements of the sales process are not effective, they must be re-engineered so they do not detract from the sales effort. Figure 2 provides an overview of the most common sales process elements.

Energy management
At Sandvik Materials Technology's main plant in Sandviken, Sweden, energy consumption is one of our major environmental aspects. Therefore we have adopted the Swedish Program for energy efficiency, PFE, and we have an energy management system according to the Swedish standard SS 627750. We are also actively involved in the European trade of Carbon dioxide emissions. Energy and fuel consumption The best solution to the carbon-dioxide problem is to "keep house" when it comes to fossil fuels. By reducing the use of oil and liquid petroleum gas (LPG) for heating purposes, Sandvik has cut its emissions considerably. In fact, over a 30-year perspective, the company has managed to cut its oil consumption from 15 000 m3 year 2003 to 5 000 m3 year 2008. While we have substituted some of the oil with LPG and electricity, the bulk of the reduction has been achieved through pure saving measures. While the housekeeping of energy is crucial to the protection of the environment, it is most certainly an important economic issue as well. The prize of electricity and fuel is very important for the production in Sandviken. Sandviks carbon-dioxide emissions in

2006 were estimated to be 117 164 tones, 75% of which consisted of combustion gases from furnaces, 22% was caused by coal injection in the meltshop, with the remaining 2% caused by internal traffic consisting of the companys own vehicles.

Management Discussions
SANDVIK ASIA LIMITED ANNUAL REPORT 2004 MANAGEMENT DISCUSSION AND ANALYSIS General Market Situation The economic optimism expressed earlier was vindicated by a GDP growth rate of 6.9% in 2004. The industrial growth rate exceeded 7% with manufacturing experiencing a resurgence at about 8%. The last quarter saw manufacturing growth touching double digit figures. Foreign exchange reserves crossed USD 130 billion inflation has been largely under control, withstanding surges in international energy prices. The financial pragmatism of the government and continued liberalization and globalization of various sectors - with insurance and construction businesses opened up, led to large external investments flowing in. Manufacturing and exports are kept energized with significant sales of capital goods +14%, production of auto and auto ancillaries +30%, machinery and equipment +26%. The infrastructural projects are experiencing new momentum. Steel and Aluminium sectors are growing rapidly on increasing demands from global markets. Many translational companies are building their manufacturing, design and engineering bases in India. Business indications for 2005 continue to be promising. Procedural rationalization, introduction of VAT and further reforms could usher in an era of sustained GDP growth at +7% levels. The year is likely to offer both challenges and opportunities for Sandvik. Investments The Company's up gradation and modernization activities continued through 2004. The total investments in fixed assets during the year were Rs. 392 Million. The major investments were in Mori-Seiki Turn mill Centre, Fete Press, Cobalt Plant, Convention Centre, Ewamatic CNC 5 axis, Laser Marking Machine, Dry Boor with Pattern Robot and Rolled Soft Grinder. All investments have been financed through internal accruals. Profitability During the year 2004, the Company's top line grew by 30%, from Rs. 3,696 Million (2003) to Rs. 4,796 Million (2004). The results before tax for the year 2004 was Rs. 997 Million (20.8% of Sales) as against Rs. 338 Million (9.3% of Sale) in 2003. The profit after taxation amounted to Rs. 871 Million as against Rs. 260 Million in 2003. Overall, the Company saw significant development during 2004. Capital Efficiency : The spread of awareness and important efforts in all product areas for capital efficiency and working capital reduction target gave

following results :- - Net working capital decreased from 32.2% to 23.2% of sales. - Return on capital employed increased from 15.3% to 36.7%. Safety & Environment : Efforts continued to enhance standards of safety and environmental aspects. Some of the salient points are: 1. One project was done using eco friendly material like use of fly ash bricks and recycled glass wherever possible. 2. At two buildings, rainwater harvesting has been completed and an ongoing programme is planned to convert more buildings. 3. Recertification of ISO 14000 System for environmental management has been successfully completed. 4. Hazardous wastes continued to be disposed off through Government approved agency. 5. Waste water stream running through property is installed with filters and plantation has been carried out in adjoining area. 6. Company plans to implement and get certified for occupational health and safety standards OHSASBSI 18001 by end of the year. 7. Remarkable reduction in accidental statistics is shown over previous year. 8. Number of actions including fire proof room for press tools and other electrical installations were carried out as per recommendations of F.M. Global, our risk management consultants.

1. Types of Business Activity

Classification of Business and Industrial Activity Primary Activities Primary businesses and industries are those which extract (i.e. mine, quarry, farm, fish or drill) things normally provided by nature, e.g. ~ fish from the sea; ~ metal from the earth; ~ food from the land. They produce raw materials in the form of oil, iron, coal or limestone, which are used to make other products. Also, they may also produce final products such as fish or fruit. Secondary Activities Secondary businesses and industries are those involved in manufacturing products. That is, they turn the raw materials produced by the primary industries into things that can be sold and used. e.g. ~ metal into cars ~ wood into furniture ~ wheat into bread

Tertiary Activities Tertiary businesses and industries are those involved in selling goods and services. For example, banks, window cleaners, hairdressers and lawyers do not make things but instead sell a service or their expertise. Other examples include transport, insurance and places of entertainment such as leisure centres and cinemas. Chain of Production Primary, Secondary and Tertiary businesses and industries all depend upon each other; one cannot exist without the other. There is a chain of production which links all 3 kinds of activity. For example, the chain of production for a wooden chair might be: Forester .>>>> Furniture Manufacturer >>>> Furniture Shop And the chain of production for a woollen sweater might be: Sheep Farmer >>>> Knitter >>>> Market Stall