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Sandvik Says Greek Crisis Spreads Concern to European Industry

Sandvik AB, the world’s biggest maker of metal-cutting tools, is barely affected by Greece’s economic turmoil though the crisis is radiating “some worry” to European customers, Chief Executive Officer Olof Faxander said.

“Greece has very little industry, so there’s tiny direct effect on us there, but it’s spreading some worry to others in Europe, which is affecting investments,” Faxander said in an interview today during the company’s capital markets day in Sandviken, Sweden, where it’s based. “Our sales in Europe are mildly affected by Greece.”

Sandvik’s revenue in Greece was 79 million kronor ($11 million) in 2011, less than 0.1 percent of the total, Faxander said. About 5 percent of the manufacturer’s sales are generated in the troubled economies of Portugal, Italy, Greece and Spain, he said.

Sandvik began a review last year aimed at boosting profitability under Faxander, who joined from Swedish steelmaker SSAB AB in February 2011. Raising the portion of Sandvik’s sales from emerging markets is part of the strategy, he said.

Sandvik closed its Greek sales office early this year and uses independent distributors there, he said. The closure resulted from the market’s small size and wasn’t directly related to the country’s debt crisis, he said.

In Spain, the “very weak” construction market will probably take several years to recover, he said. Italy has a “stagnated situation,” with little recovery in sight, he said.

Unit Repair

Sandvik’s main focus now is to raise earnings in the construction and materials technology units, its least profitable businesses, Faxander said today. The CEO reiterated that he may sell the units.

The operating margin in the construction unit was 8.7 percent in the first quarter, while it was 8.5 percent in the materials technology business, which makes furnace and heating materials. The machining solutions and mining units generated operating margins of 24.6 percent and 17.3 percent, respectively, Sandvik said April 27.

“We have two parts that are super performers and we have two that have some big challenges,” the CEO said. The turnaround programs in both areas are “off to a good start” and Sandvik hasn’t yet held talks with potential buyers.

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