DIRECTORS’ REPORTCORPORATE GOVERNANCE REPORT
Sandvik AB has its head office in Stockholm and is the Parent Company of the
Sandvik Group, with subsidiaries in about 70 countries. The Group has about 44,000
employees and revenues in about 150 countries. Sandvik AB is a public company with
its shares listed on Nasdaq Stockholm.
Corporate governance within Sandvik
is based on external rules such as
the Swedish Companies Act, theNordic Main Market Rulebook for
Issuers of Shares, the Swedish
Code of Corporate Governance (the"Code") and other relevant laws andregulations. The Code is available
at corporategovernance­board.se.
In 2021, Sandvik applied the Code
without deviating from any of its
regulations.

The Sandvik Way

Sandvik’s corporate governanceframework, The Sandvik Way, implements the external rules mentioned
above and also sets out the internal
rules and principles for governancethat apply specifically within Sandvik.
It is based on three building blocks,
as set forth in the model below, anddown in the operational structure ofeach business area.

describes how common ways ofworking have been implemented
throughout the entire organization.
Governance modelThis block outlines how the Sandvik
Group is led and governed. The Boardof Directors, elected at the Shareholders’ Meeting, sets the strategic
direction for the Group. The President
carries this out through the Group
Executive Management whose members manage and oversee the operations of the Group. The main operational responsibility in the Group lies
with the business areas and divisions,with Group functions responsible forfunctional policies and processes
supporting the business.
The Sandvik Way is implemented in
the respective business areas, withadditional requirements cascaded

Operations
The detailed controls and risk frameworks common across the Groupare detailed in this part. This includes
many aspects such as strategy andrisk management, policies, financial
forecasting and scenario planning, as
well as compliance, internal controls
and audit. Performance management,
controls and continuous improvements provide a solid basis for ourways of working.
Corporate culture
This block sets the foundation for
how we all shape our culture in thecompany and enable a customer
oriented and responsible business.
Our operational controls and risk

The Sandvik Way
GOVERNANCE STRUCTURE
Shareholders’Meetingand Board of
Directors

President andExecutive
Management

Business areas

Divisions

Business units, distribution
centers, production units,
sales areas, sales units

Group functions
OPERATIONS

Risk
management

Objectives and
Key Results

Policies andprocedures

Finance
forecastingand scenario
planning

External reporting

Sandvik
strategy

Performance
management

Complianceand Speak Up

Internal
controlInternal audit

External audit

Continuous improvements
CORPORATE CULTURE
PurposeCore values

Code of Conduct

Leadership model

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DIRECTORS’ REPORTCORPORATE GOVERNANCE MODELNOMINATION COMMITTEESHAREHOLDERS’ MEETING

EXTERNAL AUDITOR

AUDIT COMMITTEE

BOARD OF DIRECTORSREMUNERATION COMMITTEEINTERNAL AUDITPRESIDENT & GROUP EXECUTIVE MANAGEMENTACQUISITIONS ANDDIVESTITURES COMMITTEESPEAK UP &BUSINESS ETHICS

BUSINESS AREAS

GROUP FUNCTIONSDIVISIONS

frameworks are underpinned by the
ambitions and requirements of our
purpose, core values, Code of Conduct and leadership model.

Ownership structure

As of December 31, 2021 Sandvik’s
share capital amounted to SEK
1,505,263,107.60 represented by
1,254,385,923 shares. At year-end
Sandvik had about 129,900 shareholders and AB Industrivärden was
the largest owner with about 13.4
percent of the share capital. Of thetotal share capital at year-end, about
44 percent was owned by investors
outside Sweden.

Shareholders’ meeting

The General Meeting of Shareholders is the highest decision-­making
body. At the Annual General Meeting, the shareholders are given thepossibility to exercise their voting
rights in relation to, for example, theAnnual Report, dividends, electionof the Board and appointment ofauditor, and other matters stipulated
in the Companies Act, the Articles of
Association and, where applicable,
the Code.
All shareholders who have beenentered in the share register andhave informed the company of their
participation within the time limit
stated in the notice of the General
Meeting are entitled to participate
at Sandvik’s General Meetings andvote according to the number ofshares held. Shareholders are also

54

entitled to be represented by a proxyat the General Meeting. According
to the Articles of Association, theBoard may also decide to allow
shareholders to exercise their voting
rights through postal voting before a
General Meeting.
All shares in Sandvik carry equal
voting rights with one vote per share.

Ten largest shareholders,
December 31, 2021, %2021 Annual General Meeting
Shareholders representing 55.55
percent of the share capital and votes
participated at the Annual General
Meeting held on April 27, 2021. Due tothe Covid-19 pandemic, and in accordance with temporary legislation
applicable in 2021, the Annual General Meeting was conducted without
the physical presence of shareholders, representatives and third parties.
Instead, shareholders were only
entitled to exercise their voting rights
by postal voting before the Meeting.
However, the company arranged an
online shareholder event before theMeeting where shareholders wereable to listen to presentations by the
President and CEO and Chairman of
the Board and ask them questions.
Information on the resolutions
passed at the Meeting were disclosed as soon as the outcome ofthe postal voting had been finallyconfirmed. Resolutions included thefollowing:– Dividend of SEK 6.50 per share(consisting of an ordinary dividendof SEK 4.50 and an extra dividendof SEK 2.00)

Handelsbanken Funds

S A N DV I K | A N N UA L R EP O R T 2021

AB Industrivärden

13.4

BlackRock

3.4

Alecta Pension Insurance
Swedbank Robur Funds
Vanguard

Lundbergföretagen AB
SEB Funds

Fidelity International
Norges Bank

4.5
3.2
2.8
2.7
1.9
1.6
1.5
1.4

Source: Monitor by Modular Finance AB– Election of Andreas Nordbrandt as
new Board member and re-election of Board members Jennifer
Allerton, Claes B­ oustedt, Marika
Fredriksson, Johan Molin, Helena
Stjernholm, Stefan Widing and
Kai Wärn as well as re-election ofJohan Molin as Chairman of theBoard– Re-election of Pricewaterhouse­­
Coopers AB as auditor– Approval of the Board of Directors’
remuneration report– Adoption of a long-term incentive
program in the form of a performance share program for about
350 senior executives and key
employees in the Group– Authorization for the Board to
decide on acquisition of the­company’s own shares up to a
maximum of 10 percent of all theshares in the company– Amendments to the Articles of
Association, to include a possibilityof postal voting before General
Meetings

In connection with the 2021
Annual General Meeting, an online
shareholder event was broadcasted.

For additional information about theAnnual General Meeting, including
the minutes, visit home.sandvik.
2022 Annual General Meeting
The next Annual General Meeting will
be held on April 27, 2022. More information can be found in the notice
convening the General Meeting andat home.sandvik.

Nomination Committee

The Nomination Committee is apreparatory body that prepares proposals for, among other things, theelection of the Board of Directors, theChairman of the Board and auditors
as well as fees for adoption at theGeneral Meeting. The Annual General
Meeting has adopted an instruction
for the Nomination Committee, which
Nomination Committee’s tasks
ahead of the 2022 Annual General
Meeting– Proposal concerning the Chairmanof the Meeting– Proposal concerning the number ofBoard members– Proposal concerning remunerationof each Board member– Proposal concerning the Board andChairman of the Board– Proposal concerning auditor andremuneration of the auditor– If deemed necessary, proposal
for changes to the Nomination
Committee’s instruction concerning
the procedure for appointment of
the Nomination Committee for theforthcoming Annual General Meetingand its assignment

includes a procedure for appointing
the Nomination Committee, valid
until a General Meeting resolves ona change. In accordance with this
instruction, the Nomination Committee shall consist of members
appointed by each of the four largest
shareholders in terms of the numberof votes on the final business day
in August plus the Chairman of theBoard (convener).

an appropriate composition in viewof the company’s operations, phaseof development and other relevant
circumstances, display diversity andbreadth in terms of qualifications,experience and background of theBoard members elected by the General Meeting and that the company
shall strive for gender balance.

Board of Directors

Nomination Committee for2022 AGM
For the 2022 Annual General Meeting,
the Nomination Committee consists of Fredrik Lundberg, Chairman(Industri­värden), Anna Magnusson(Alecta), Marianne Nilsson (­Swedbank
Robur Funds), Lars Pettersson (Lundbergs) and Johan Molin (Sandvik’s
Chairman of the Board).
Up to the date of this Annual
Report, the Nomination Committee
met on three occasions. The Nomination Committee was informed of
the results of the Board’s own evaluation. The Committee met with the
President and CEO that presented
the company’s strategy. The Nomination Committee discussed thegeneral criteria that Board members
should fulfill, including the independence requirement, and reviewed
the number of Board assignmentsthat each Board member has inother companies. The Nomination
Committee applied rule 4.1 of theCode as the diversity policy. This
rule states that the Board shall have

The Board of Directors is responsible
for the company’s organization andthe management of the company’sbusiness. The Board is required tocontinuously monitor the company’s
and the Group’s financial position.
The Board is to ensure that thecompany’s organization is designed
in a way that ensures that the financial statements, the management ofassets and the company’s financial
condition in general are controlled ina satisfactory manner.
The President is appointed by the
Board and is responsible for the daily
operations pursuant to guidelines
and instructions issued by the Board.
The distribution of responsibilities
between the Board and the President
is laid down in the Board’s Procedural
Guidelines which are reviewed andadopted each year. The review isbased on such aspects as the Board’s
evaluation of the individual and collective work that the Board performs.
In addition to financial reporting
and the monitoring and follow-up
of daily operations and profit trend,
Board meetings address the goals

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DIRECTORS’ REPORTand strategies for the operations, significant acquisitions and investments,
as well as matters relating to the capital structure. Senior executives reportbusiness plans and strategic issues
to the Board on an ongoing basis.
Composition
As of December 31, 2021 Sandvik’s
Board consisted of eight members
elected by the Annual General Meeting. The Nomination Committee communicated before the 2021 Annual
General Meeting that the Nomination
Committee had applied rule 4.1 of theCode as the diversity policy. The current Board composition is the resultof the work of the Nomination Committee prior to that General Meeting.
The Board consists of members withexperience from different geographic
areas and different industry sectors.
Excluding the President, 43 percentof the Board members elected by theGeneral Meeting are women.
Pursuant to Swedish legislation,
trade unions are entitled to representation on the Board and they haveappointed two members and two
deputies.
The Board members are presented
on pages 60–61.
Independence
Marika Fredriksson and Helena
Stjernholm are not regarded as inde-

pendent in relation to major shareholders in the company and Stefan
Widing is not regarded as independent in relation to the company andits executive management. The otherfive Board members elected by theGeneral Meeting are all independent in relation to Sandvik and its
executive management, as well as
the company’s major shareholders.
Accordingly, the composition of theBoard complies with the independence requirements of the Code.

Attendance at Board and Committee meetings in 2021
MemberFunction

Thomas Andersson

Deputy2)Jennifer Allerton
Claes Boustedt

Marika Fredriksson

Erik Knebel

MemberChairman

Helena Stjernholm

MemberAndreas Nordbrandt
Stefan Widing
Kai Wärn

19

Claes Boustedt

19

Marika Fredriksson

17

Johan Karlström1)

Audit
Committee
514Thomas Lilja

19

Tomas Kärnström

Remuneration
Committee
356Erik Knebel2)

Acquisitions
and Divestitures
Committee
10

10
1

19

Johan Molin

19

5

3

10

19

5

3

10

13

Andreas Nordbrandt3)
Helena Stjernholm
Stefan Widing

19

19

Kai Wärn4)21) R esigned as Board member at the 2021 Annual General Meeting and thereby also as memberof the Remuneration Committee.
2) Appointed deputy employee representative in April 2021.
3) Elected Board member at the 2021 Annual General Meeting.
4) R eplaced Johan Karlström as member of the Remuneration Committee as of April 27, 2021.

Independentin acc. with
the Code

Deputy2)

Johan Molin

Thomas Lilja

19

Thomas Andersson

MemberMember2)

19

Jennifer Allerton

MemberTomas Kärnström

Board

Total number of meetings

Composition of the Board as of December 31, 2021
Name

Board proceedings during 2021
During the year, the Board held
nineteen meetings. The President
presented the 2025 strategy. The
Presidents of all business areas
presented their goals and strategies
and the Board also reviewed thestrategies and results from a numberof the divisions. During the year there
was a special focus on recovery andreconstruction due to the Covid-19
pandemic. The Board addressed
matters related to the overall Group

Member2)

MemberMemberMember

Yes
Yes

No3)

Shareholding,number1)
Dec 31, 2021

Elected

0

2012

2,500

2017

10,00050,000
1

2,889
Yes

Yes

No3)

No3)

Yes

4,840

830,0004)

0

5,000

49,48912,000

2015
2015

Audit
Committee

Remuneration
Committee

ChairmanAcquisitions
and Divestitures
Committee

Member

2021

2006

2016

2015

MemberChairman

Chairman

2016

MemberMemberMember

2021

2020

2020

Member1) Pertains to own and closely related persons’ shareholdings in Sandvik AB.
2) Employee representatives (both members and deputy members participate in Board meetings). Thomas Lilja (member) and Erik Knebel (deputy)
represent Unionen/Ledarna/Swedish Association of Graduate Engineers. Tomas Kärnström (member) and Thomas Andersson (deputy) repre­
sent IF Metall.
3) Marika Fredriksson and Helena Stjernholm are not regarded as independent in relation to major shareholders in the company and Stefan Widing
is not regarded as independent in relation to the company and its executive management.
4) In addition 1,000,000 call options in Sandvik AB.

56

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DIRECTORS’ REPORT

strategy, including revised purpose,values and key objectives for 2025, IT
and cyber security, risk management,
human resources, such as environment, health and safety, and issues
concerning investments and operational restructuring and reviewed
previously made investments. Further,
the Board handled the ongoingprocess of separating the Sandvik
Materials Technology (SMT) businessarea with the target to distribute SMT
to the shareholders and separately
list it. It also handled a large numberof acquisition projects, including theacquisitions of DWFritz Automation,
Chuzhou Yongpu Carbide Tools, CNC
Software and Cambrio, as well as theagreements to acquire GWS Tool
Intermediate Holdings and Deswik.
The Remuneration Committee,
Audit Committee and the Acquisitions and Divestitures Committee
reported from their respective meetings. In respect to the Audit Committee, reported matters included
accounting principles, financial
outcome, ERM, compliance, Speak
Up and Code of Conduct, internal
control and internal audit as well as
the result of the external audit. The
Committees also submitted matters for resolution by the Board andthe minutes and reports from thesemeetings were made available to theBoard members.
Remuneration of the Board
As resolved at the 2021 Annual­General Meeting, the fee to the­Chairman of the Board is SEK
2,625,000 and the fee to each of
the non-executive Board members
elected by the General Meeting is
SEK 710,000.
In addition, SEK 310,000 was paid
to the Chairman of the Audit Committee and SEK 175,000 to each of theother Committee members, in total
SEK 660,000. The Chairman of theRemuneration Committee was paid
SEK 150,000 and each of the otherCommittee members SEK 118,000,
in total SEK 386,000. The Chairmanof the Acquisitions and Divestitures
Committee was paid SEK 200,000
and each of the other Committee
members SEK 150,000, in total SEK
500,000.

For more detailed information on
remuneration of the Board members,
see note G4.
Evaluation of the work of the Board
To ensure the quality of the work of
the Board and to identify the possible
need for further expertise and experience, the work of the Board and its
members is evaluated annually. In
2021, the evaluation, which was led
by the Chairman of the Board, wascarried out by way of each Board
member responding anonymously toan online questionnaire. The Chairman also held separate evaluation
discussions with all Board members.
The compiled results of the evaluations were presented to the Board aswell as to the Nomination Committee.

Board Committees

The tasks of the Committees andtheir work procedures are stipulated
in written instructions issued by the
Board. The Committees’ primary task
is to prepare issues and present themto the Board for resolution.
Remuneration Committee
As of the 2021 Annual General Meeting the members of the Remuneration Committee were Johan Molin(Chairman of the Committee), Helena
Stjernholm and Kai Wärn. The tasksof the Remuneration Committee are,among others, those prescribed by
the Code, which include preparing
proposals regarding guidelines forremuneration of senior executives
and long-term incentive programs forsenior executives.
Based on the recommendationsof the Remuneration Committee,
the Board decides the remunerationand terms of employment for the
President, who in turn decides on
the remuneration to be paid to theGroup Executive Management in
consultation with the Remuneration
Committee.
For guidelines, remuneration andother benefits payable to the Group
Executive Management, refer to the
Guidelines for the remuneration ofsenior executives on pages 48–50
and note G4.
During 2021 the Remuneration
Committee held three meetings.

Audit Committee
During 2021 the members of the
Audit Committee were Claes Boustedt (Chairman of the Committee),
Johan Molin and Helena Stjernholm.
Areas addressed by the Audit Committee mainly related to:– Monitoring the financial reportingand ensuring its reliability– Effectiveness of the system ofinternal control and internal audit– Planning, scope and follow-up of
the internal and external audit for
the year– Assistance to the Nomination
Committee with regards to proposal for auditor– Monitoring of the external auditor’s
independence and objectivity
vis-à-vis the company, including
the extent to which the auditor provides other services than auditing
services to the company– The Group’s systematic processes
for overall corporate risk management (ERM), as well as moredetailed risk management matters
including legal disputes, compliance, corporate investigations, IT
security, Group Digital Security
Improvement, accounting procedures, taxation, treasury, finance
operations, insurance coverageand pension issues– The development and effectiveness of compliance processes,with special focus on the roll-outof the compliance program, theCompliance House– Sandvik’s Code of Conduct, somespecific cases managed throughSpeak Up, Sandvik’s global whistleblowing system, as well as theoverall effectiveness of the system– Sandvik’s sustainable businessstrategy and materiality analysis
During 2021 the Audit Committee
held five meetings at which Sandvik’s
external auditor and representativesof the company’s management were
present.
Acquisitions and Divestitures
Committee
During 2021 the members of theAcquisitions and Divestitures Committee were Johan Molin (Chairmanof the Committee), Claes Boustedt

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57

DIRECTORS’ REPORTand Helena Stjernholm. The purposeof the Committee is to provide a
better process for preparing major or
strategically important acquisitions
and divestitures for Board decisions.
The Committee meets on an ad hoc
basis, at the request of the President
and CEO in consultation with the
Chairman of the Board.
During 2021 the Acquisitions andDivestitures Committee held ten
meetings. The Committee reviewed
matters mostly related to the separation and potential distribution andlisting of the Sandvik Materials Technology business area, as well as theacquisitions of DWFritz Automation,
CNC Software and Cambrio.

– Christophe Sut, President of the
Sandvik Manufacturing Solutions
business area segment (as of October 1, 2021)– Anders Svensson, President of
Sandvik Rock Processing Solutions– Henrik Ager, President of Sandvik
Mining and Rock Solutions– Göran Björkman, President of­Sandvik Materials Technology– Jessica Alm, Executive Vice President and Head of Group Communications and Sustainability– Johan Kerstell, Executive Vice
President and Head of Human
Resources– Åsa Thunman, Executive Vice
President and General Counsel

President and Group
Executive Management

The members of the Group Executive
Management are presented further
on pages 62–63.

The President is accountable forGroup decision-making in all areasdelegated by the Board. In order toensure a full Group perspective inthese matters, the President has
appointed the Group Executive
Management as an advisory forum,
focusing on how to achieve Grouptargets, strategies, structure andorganization. The Group Executive
Management meets each monthand its members are accountablefor implementing the President’s
decisions.
In 2021, the Group Executive Management consisted of:– Stefan Widing, President and CEO
as well as President of Sandvik
Manufacturing and Machining
Solutions, and (up until September
30, 2021) President of the Sandvik
Manufacturing Solutions businessarea segment– Tomas Eliasson, Executive Vice
President and Chief Financial Officer (up until October 31, 2021)– Cecilia Felton, Executive Vice President and Chief Financial Officer (asof February 1, 2022), Vice PresidentGroup Control and acting Chief
Financial Officer (November 1,
2021–January 31, 2022)– Nadine Crauwels, President of the
Sandvik Machining Solutions business area segment

58

Business areas

The Sandvik organizational modelis based on a decentralized business model. There are four separatebusiness areas – Sandvik Mining
and Rock Solutions, Sandvik Rock
Processing Solutions, Sandvik Manufacturing and Machining Solutions
and Sandvik Materials Technology– each based on distinct productofferings. Each business area has full
responsibility and accountability for
its respective business results.
Sandvik Manufacturing andMachining Solutions is divided
into two business area segments– Sandvik Machining Solutions andSandvik Manufacturing Solutions.
Further, each of the four businessareas is organized in a number ofdivisions based on product offeringor brand. The division is the highest
operational level in the Sandvik organizational structure. Certain divisions
that are based on a product offering
are also divided into business units
representing a defined part of the
product offering.
For an overview of Sandvik’s organizational model, refer to page 2 andvisit home.sandvik for more detailed
information relating to the Group’sbusiness activities and productportfolios.

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Group functions

There are five Group functions within
Sandvik: Communications and Sustainability, Finance, HR, Legal and IT.
Group functions specifically focus
on setting the appropriate enabling
structures and processes that arecommon for the Group or cover a
specific area for which the Group is
responsible.

External auditor

At the 2021 Annual General Meeting,the audit firm PricewaterhouseCoopers AB was re-elected auditor of
Sandvik AB for the period until the2022 Annual General Meeting. Peter
Nyllinge is the auditor-in-charge.
The auditor continuously audits
and monitors the company’s generalaccounting and the execution by
the Board and the President of theirrespective responsibilities.
The progress of the audit isreported regularly during the year to
the management teams of individual companies and the businessareas, the Audit Committee and theBoard. The auditor meets with theBoard at least once a year without
the President or any other memberof the Group Executive Management
attending.
The independence of the external
auditor is guaranteed by the Audit
Committee having determined theprinciples for allowing non-audit
services to be provided by the auditor
and, in some cases, pre-approving
non-audit services.
Audit fees are paid continuously
over the period in office on an
approved current account basis. For
detailed information on fees paid tothe auditor, see note G5.

Internal control over financial
reporting

The Sandvik organization manages awell-established financial reporting
process aimed at ensuring a highlevel of internal control.
The internal control system aligns
with the conceptual framework of
COSO, which is based on five key
components that provide an effective framework for describing andDIRECTORS’ REPORT

designing the internal control system
implemented in the organization. The
five components are Control Environment, Risk Assessment, Control
Activities, Information and Communication, and Monitoring and Follow-up.
The application of the COSO framework is described below.
Sandvik’s Board of Directors is
ultimately responsible for the governance of risk management including internal control over financial
reporting.
Control environment
Sandvik internal control over financial
reporting forms an integral part of theoperations, described in The Sandvik
Way on page 53, which also includes
risk assessments, policies, procedures and compliance.
The Sandvik Financial Reporting
Policies and Procedures govern control over financial reporting. These
documents contain detailed instructions regarding accounting policies
and financial reporting procedures
to be applied by all Sandvik reporting
entities.
A Sandvik Financial Internal Control
Framework has been developed andincludes key components such as
well-defined roles and responsibilities, internal control procedures andthe risk and control matrix which
defines a mandatory minimum ofcontrol activities that contribute to
the mitigation of risks to acceptablelevels. Internal control implementation projects continued during 2021
and will be completed in the firstquarter of 2022.
Risk assessment and risk
management
The Enterprise Risk Management(ERM) process at Sandvik includes
the area of financial reporting. Read
more about the Enterprise Risk Management (ERM) program on page 64.

Key risks noted in local assessments
and observations made by Internaland External Audit are also taken
into consideration to ensure that
adequate controls exist to mitigate
these risks.
Control activities
Mandatory control activities include
business process controls, IT
controls and corporate governancecontrols focusing on compliancewith policies and procedures. Internal controls are tailored per each
operational entity based on risks andapplicability. Entity management andprocess owners are responsible for
ensuring that internal controls areoperated as per agreed design.
At Group level, Group Control manages the reporting process to ensure
the completeness and accuracy offinancial reporting and compliancewith IFRS requirements.
Controllers in the divisions andbusiness areas perform analyticalreviews and investigations, conductbusiness trend analyses and update
forecasts.
Information and communication
Policies and procedures related tofinancial reporting are updated andcommunicated on a regular basis to
all entities.
Results of monitoring and statusof improvement activities related
to internal controls are included in
the CFO report which is part of theagenda for the Audit Committee
meetings.
Quarterly interim reports are
published externally and are supplemented by investor meetings
attended by members of the Group
Executive Management.
Monitoring and follow-up
Entity management as well as local
and global process owners are

responsible for testing the effective­
ness of internal controls throughself-assessments on a quarterly basis
and according to the requirements in
the Sandvik Internal Control Framework. Results of the self-assessment
testing of controls including test evidence are reported and consolidated
in a Governance, Risk and Compliance
IT tool. The tool also requires reporting of action plans with the purpose toremediate ineffective controls.
Business areas and divisions are tomonitor the remediation of ineffective controls. The Audit Committeemonitors the effectiveness of internal
controls related to financial reporting presented by management withpotential deficiencies and suggested
actions.
The Board reviews all quarterlyinterim reports as well as the Annual
Report prior to publishing. The Audit
Committee reports to the Board
regarding internal control matters
including matters for resolution.
Minutes from Audit Committee
meetings are made available to Board
members.

Internal audit

Internal Audit is subordinated to the
Audit Committee and the Vice President of Internal Audit reports to the
Audit Committee.
Internal audits include, as a basis,the Group’s policies for corporate
governance, risk management andinternal control regarding areas suchas financial reporting, compliancewith the Code of Conduct and IT.
The outputs of the audits include
action plans and programs for
improvement. Findings are reported
to the business area management
and to the Audit Committee.
Internal audit interacts withexternal audit on a periodic basis to
discuss and share audit plans andaudit results.

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AUDITORS’ REPORT

AUDITORS’ REPORT
Unofficial translation

To the general meeting of the shareholders of Sandvik AB(publ), corporate identity number 556000-3468
Report on the annual accounts andconsolidated accounts
Opinions
We have audited the annual accounts and consolidated accountsof Sandvik AB (publ) for the year 2021. The annual accounts andconsolidated accounts of the company are included on pages
46–140 in this document.
In our opinion, the annual accounts have been prepared inaccordance with the Annual Accounts Act and present fairly, in allmaterial respects, the financial position of Parent Company and theGroup as of 31 December 2021 and its financial performance andcash flow for the year then ended in accordance with the Annual
Accounts Act. The consolidated accounts have been preparedin accordance with the Annual Accounts Act and present fairly, inall material respects, the financial position of the Group as of 31
December 2021 and their financial performance and cash flow
for the year then ended in accordance with International Financial
Reporting Standards (IFRS), as adopted by the EU, and the Annual
Accounts Act.
A corporate governance statement has been prepared and is inagreement with the Annual Accounts Act. The statutory administration report and the corporate governance statement are consistent with the other parts of the annual accounts and consolidated
accounts.
We therefore recommend that the general meeting of shareholders adopts the income statement and balance sheet for the
Parent Company and the Group.
Our opinions in this report on the annual accounts and consolidated accounts are consistent with the content of the additional
report that has been submitted to the Parent Company’s audit
committee in accordance with the Audit Regulation (537/2014)
Article 11.
Basis for Opinions
We conducted our audit in accordance with International Standards on Auditing (ISA) and generally accepted auditing standards
in Sweden. Our responsibilities under those standards are further
described in the Auditor’s Responsibilities section. We are independent of the Parent Company and the Group in accordance withprofessional ethics for accountants in Sweden and have otherwise fulfilled our ethical responsibilities in accordance with theserequirements. This includes that, based on the best of our knowledge and belief, no prohibited services referred to in the Audit
Regulation (537/2014) Article 5.1 have been provided to the audited
company or, where applicable, its Parent Company or its controlled
companies within the EU.
We believe that the audit evidence we have obtained is sufficientand appropriate to provide a basis for our opinions.
Our audit approach
Audit scope
We designed our audit by determining materiality and assessing
the risks of material misstatement in the consolidated financial statements. In particular,we considered where management
made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions andconsidering future events that are inherently uncertain. As in all of
our audits, we also addressed the risk of management override ofinternal controls, including among other matters consideration ofwhether there was evidence of bias that represented a risk of material misstatement due to fraud.

We tailored the scope of our audit in order to perform sufficient
work to enable us to provide an opinion on the consolidated financial statements as a whole, taking into account the structure of theGroup, the accounting processes and controls, and the industry inwhich the Group operates.
Sandvik conducts business via subsidiaries in many territories.
Operationally, the business is organized in divisions that are alignedwith the Group’s four Business Areas. There are joint functions at
various levels of the Group to support the operational activities ofthe divisions.
In order to tailor our overall audit approach, we have updated ourunderstanding of how the Group’s business is organized, about
important systems and processes as well as the internal controls
put in place to provide comfort to management and the directors
with respect to precision of the financial reporting. For this purpose, we have held interviews with management at various levelsof the Group and heads of Group functions to discuss the businessand the Group’s strategy. We have also obtained and read management reports, policies, instructions and planning and steering
documents. In addition, we have had a close dialogue with bothGroup Internal Audit and Group Internal Controls in order to shareknowledge and coordinate activities when relevant.
With all of this as a starting point and for the purpose of expressing an opinion on the consolidated accounts, we decided thatapproximately 80 reporting units were the most important andshould be in scope for the Group audit. Most subsidiaries of theGroup are also subject to statutory audit requirements. The central team was responsible for the audit of significant IT systems,
processes, transaction flows and functions including the consolidation and the Parent Company accounts. The local teams were
responsible for auditing items related to the operations in eachreporting unit that emanates from local production and sales
activities.
We have considered the impact Covid-19 has had on our audit
and tailored our procedures to properly cover any new and/or
increased risks. On an overall level we have been able to conduct
our audit although the pandemic has led to other ways of working
and use of digital tools for communication and collection of audit
evidence.
Materiality
The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance about
whether the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are
considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of the consolidated financial statements.
Based on our professional judgment, we determined certain
quantitative thresholds for materiality, including the overall Groupmateriality for the consolidated financial statements as a whole.
These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of
our audit procedures and to evaluate the effect of misstatements,
both individually and in aggregate on the financial statements as awhole.
Key audit matters
Key audit matters of the audit are those matters that, in our professional judgment, were of most significance in our audit of theannual accounts and consolidated accounts of the current period.
These matters were addressed in the context of our audit of, andin forming our opinion thereon, the annual accounts and consolidated accounts as a whole, but we do not provide a separate opinion on these matters.

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AUDITORS’ REPORTKey audit matter
Revenue recognition in the appropriate period
The Group manufactures and sells products and services to its customers globally, mainly through its own distribution network. Sales
contracts contain various performance obligations and other terms
and the determination of when significant performance obligations
have been met varies albeit a specific point in time can often be
established. The Group has analyzed its various sales contracts andconcluded on the principles for deciding in which period or periods
the Group’s sales transactions should be recognized as revenue.
Disclosures in notes G2, G3 and P2 provide additional information
on how the Group accounts for its revenue.
Measurement of goodwill and intangible assets with an indefinite
life including acquired intangible assets
The majority of Sandvik’s intangible assets have been acquired
externally, mostly through acquiring businesses and represent significant amounts. Assets with indefinite useful life such as goodwill
are not subject to yearly depreciation. Instead, an annual test willshow whether the carrying amount for the cash generating unit canstill be supported. Sandvik acquired several businesses containing
intangible assets during 2021.
There are a number of instances where management’s judgment
is decisive for the accounting treatment in connection with acquiring businesses. Management’s estimates of the intangible assets’potential to generate future cash flows and other assumptions arealso decisive when preparing the annual impairment tests.
Note G13 contains additional information on the Group’s intangible assets and the significant assumptions applied in the annual
impairment tests. In note G31 there is additional information aboutbusiness combinations, accounting principles and acquired intangible assets. .
Measurement of inventory
Sandvik keeps significant stocks of raw materials, spare parts andwork-in-progress at its production units and stores finished goods
mostly at its sales units and distribution centers. The inventory
balance is material and measurement of inventory is important fora fair presentation of gross margin. A due process is required toprepare accurate reporting of the acquisition cost when procurement, production and logistical processes are complex. Establishing product costing requires many instances of management
judgment which has an impact on the reported values. This includes
assessing normal production volumes, foreign currency, prices ofraw materials and allocation of other direct and indirect costs. For
finished goods, assessment is needed regarding obsolescence andhow sellable the products are. Finally, there is a complexity in monitoring and measuring volumes particularly for some raw materials
and work in progress as well as eliminating effects from intra Grouptransactions.
Notes G18 and P14 provide information about the Group’s
accounting principles for measuring inventory and additional information on the line item.

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How our audit addressed the Key audit matter
Our audit included but was not limited to the following activities:– Mapped and evaluated selected systems and processes forrevenue recognition and tested a sample of key controls.
– Evaluated whether the Group accounting principles for revenue
recognition comply with IFRS.
– Tested a sample of sales transactions for compliance with theGroup accounting principles.
– Performed data analytical procedures to identify and evaluate asample of manual and automatic journal entries.
– Traced disclosure information to accounting records and othersupporting documentation.
Our audit included but was not limited to the following activities:– Assessed the model used by the Group for impairment testingand evaluated the significant assumptions for establishing forecasted cash flows and discount interest rates used for calculating the value-in-use of the cash generating units. In our evaluation, we have compared with the historic business performance
the Group’s forecasts and strategic planning as well as withexternal data sources when possible and relevant.
– Evaluated whether the purchase price allocations of the significant acquisitions made during the year meet the requirements of IFRS and have been prepared according to generally
accepted practices. Assessed that significant assumptions
used to measure values of acquired assets are reasonable. We
have involved valuation specialists when conducting our work.
– Traced disclosure information to accounting records and othersupporting documentation.

Our audit included but was not limited to the following activities:– Mapped and evaluated selected systems and processes forinventory and tested a sample of key controls for establishingcost.
– Tested, on a sample basis, stocks of raw materials to actual
prices. Assessed the reasonableness of the product costing forwork in progress and finished goods.
– Participated in stock taking at many locations and tested thecut-off of deliveries in or out of inventory.
– Obtained the Group’s monitoring controls of slow movers andassessments of obsolescence as well as net selling prices.
– Traced disclosure information to accounting records and othersupporting documentation.

AUDITORS’ REPORT

Other Information than the annual accounts andconsolidated accounts
This document also contains other information than the annual
accounts and consolidated accounts and is found on pages
1–46 and 154–156, and the Statutory Sustainability Report andSustainable Business Report on pages 7–9, 14–17, 68–70 and
142–152. This other information also contains the Remuneration
report that we expect to receive after the release of the Auditors’
report. The Board of Directors and the President and CEO are
responsible for this other information.
Our opinion on the annual accounts and consolidated accounts
does not cover this other information and we do not express any
form of assurance conclusion regarding this other information.
In connection with our audit of the annual accounts and consolidated accounts, our responsibility is to read the information
identified above and consider whether the information is materially inconsistent with the annual accounts and consolidated
accounts.
In this procedure we also take into account our knowledge
otherwise obtained in the audit and assess whether the information otherwise appears to be materially misstated. If we, basedon the work performed concerning this information, conclude
that there is a material misstatement of this other information, weare required to report that fact. We have nothing to report in thisregard.
Responsibilities of the Board of Director’s andthe President and CEO
The Board of Directors and the President and CEO are responsible for the preparation of the annual accounts and consolidated
accounts and that they give a fair presentation in accordancewith the Annual Accounts Act and, concerning the consolidated
accounts, in accordance with IFRS as adopted by the EU. The
Board of Directors and the President and CEO are also responsible for such internal control as they determine is necessary
to enable the preparation of annual accounts and consolidated
accounts that are free from material misstatement, whether due
to fraud or error.
In preparing the annual accounts and consolidated accounts,
The Board of Directors and the President and CEO are responsible for assessing the ability of the company and the Group tocontinue as a going concern. They disclose, as applicable, matters related to going concern and using the going concern basisof accounting. The going concern basis of accounting is however
not applied if the Board of Directors and the President and CEO
intend to liquidate the company, to cease operations, or have norealistic alternative but to do so.
The Audit Committee shall, without prejudice to the Boardof Director’s responsibilities and tasks in general, among otherthings oversee the company’s financial reporting process.
Auditor’s responsibility
Our objectives are to obtain reasonable assurance about whether
the annual accounts and consolidated accounts as a whole arefree from material misstatement, whether due to fraud or error,
and to issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and generally accepted auditing standards in Sweden will always detecta material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually orin the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of theseannual accounts and consolidated accounts.
A further description of our responsibility for the audit of theannual accounts and consolidated accounts is available on Revisorsinspektionen’s website: www.revisorsinspektionen.se/revisornsansvar. This description is part of the auditor´s report.

Report on other legal and regulatory requirements
Opinions
In addition to our audit of the annual accounts and consolidated
accounts, we have also audited the administration of the Boardof Director’s and the President and CEO of Sandvik AB (publ) for
the year 2021 and the proposed appropriations of the company’s
profit or loss.
We recommend to the general meeting of shareholders that the
profit be appropriated in accordance with the proposal in the statutory administration report and that the members of the Board of
Director’s and the President and CEO be discharged from liability
for the financial year.
Basis for Opinions
We conducted the audit in accordance with generally accepted
auditing standards in Sweden. Our responsibilities under thosestandards are further described in the Auditor’s Responsibilities section. We are independent of the Parent Company and theGroup in accordance with professional ethics for accountants in
Sweden and have otherwise fulfilled our ethical responsibilities inaccordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions.
Responsibilities of the Board of Director’s andthe President and CEO
The Board of Directors is responsible for the proposal for appropriations of the company’s profit or loss. At the proposal of a dividend, this includes an assessment of whether the dividend is justifiable considering the requirements which the company’s and theGroup’s type of operations, size and risks place on the size of the
Parent Company’s and the Group’ equity, consolidation requirements, liquidity and position in general.
The Board of Directors is responsible for the company’s organization and the administration of the company’s affairs. This
includes among other things continuous assessment of thecompany’s and the Group’s financial situation and ensuring thatthe company´s organization is designed so that the accounting,management of assets and the company’s financial affairs otherwise are controlled in a reassuring manner. The President and CEOshall manage the ongoing administration according to the Boardof Directors’ guidelines and instructions and among other matterstake measures that are necessary to fulfill the company’s accounting in accordance with law and handle the management of assets
in a reassuring manner.
Auditor’s responsibility
Our objective concerning the audit of the administration, andthereby our opinion about discharge from liability, is to obtain
audit evidence to assess with a reasonable degree of assurance
whether any member of the Board of Directors or the President
and CEO in any material respect:– has undertaken any action or been guilty of any omission which
can give rise to liability to the company, or– in any other way has acted in contravention of the Companies
Act, the Annual Accounts Act or the Articles of Association.
Our objective concerning the audit of the proposed appropriationsof the company’s profit or loss, and thereby our opinion about this,is to assess with reasonable degree of assurance whether the proposal is in accordance with the Companies Act.
Reasonable assurance is a high level of assurance, but is not aguarantee that an audit conducted in accordance with generally
accepted auditing standards in Sweden will always detect actions
or omissions that can give rise to liability to the company, or thatthe proposed appropriations of the company’s profit or loss are
not in accordance with the Companies Act.
A further description of our responsibility for the audit of theadministration is available on Revisorsinspektionen’s website:www.revisorsinspektionen.se/revisornsansvar. This description ispart of the auditor’s report.

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AUDITORS’ REPORTThe auditor’s examination of the ESEF report
OpinionIn addition to our audit of the annual accounts and consolidated
accounts, we have also examined that the Board of Directors andthe President and CEO have prepared the annual accounts andconsolidated accounts in a format that enables uniform electronic
reporting (the Esef report) pursuant to Chapter 16, Section 4(a)of the Swedish Securities Market Act (2007:528) for Sandvik AB(publ) for the financial year 2021.
Our examination and our opinion relate only to the statutory
requirements.
In our opinion, the Esef report #[checksum] has been preparedin a format that, in all material respects, enables uniform electronic
reporting.
Basis for opinions
We have performed the examination in accordance with FAR’s
recommendation RevR 18 Examination of the Esef report. Our
responsibility under this recommendation is described in moredetail in the Auditor’s Responsibility section. We are independentof Sandvik AB (publ) in accordance with professional ethics foraccountants in Sweden and have otherwise fulfilled our ethicalresponsibilities in accordance with these requirements.
We believe that the evidence we have obtained is sufficient andappropriate to provide a basis for our opinion.
Responsibilities of the Board of Director’s andthe President and CEO
The Board of Directors and the President and CEO are responsible
for ensuring that the Esef report has been prepared in accordancewith Chapter 16, Section 4(a) of the Swedish Securities Market Act(2007:528), and for such internal control that the Board of Directors and the President and CEO determine is necessary to prepare
the Esef report without material misstatements, whether due tofraud or error.
Auditor’s responsibility
Our responsibility is to form an opinion with reasonable assurance
whether the Esef report is in all material respects prepared in a format that meets the requirements of Chapter 16, Section 4(a) of theSwedish Securities Market Act (2007:528), based on the procedures performed.
RevR 18 requires us to plan and execute procedures to achievereasonable assurance that the Esef report is prepared in a format
that meets these requirements.

Reasonable assurance is a high level of assurance, but it is nota guarantee that an engagement carried out according to RevR 18
and generally accepted auditing standards in Sweden will always
detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if, individuallyor in aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of the ESEF
report.
The audit firm applies ISQC 1 Quality Control for Firms that
Perform Audits and Reviews of Financial Statements, and other
Assurance and Related Services Engagements and accordingly
maintains a comprehensive system of quality control, including
documented policies and procedures regarding compliance withprofessional ethical requirements, professional standards andlegal and regulatory requirements.
The reasonable assurance engagement involves obtaining
evidence, through various procedures, that the Esef report has
been prepared in a format that enables uniform electronic reporting of the annual accounts. The procedures selected depend on
the auditor’s judgment, including the assessment of the risks ofmaterial misstatement in the report, whether due to fraud or error.
In carrying out this risk assessment, and in order to design procedures that are appropriate in the circumstances, the auditor
considers those elements of internal control that are relevant to
the preparation of the Esef report by the Board of Directors andthe President and CEO, but not for the purpose of expressing an
opinion on the effectiveness of those internal controls. The reasonable assurance engagement also includes an evaluation of theappropriateness and reasonableness of assumptions made by the
Board of Directors and the President and CEO.
The procedures mainly include a technical validation of the Esef
report, i.e. if the file containing the Esef report meets the technical specification set out in the Commission’s Delegated Regulation (EU) 2019/815 and a reconciliation of the Esef report with theaudited annual accounts and consolidated accounts.
Furthermore, the procedures also include an assessment of
whether the Esef report has been marked with iXBRL which enables
a fair and complete machine-readable version of the consolidated
statement of financial performance, statement of financial position,statement of changes in equity and the statement of cash flow.
PricewaterhouseCoopers AB, Torsgatan 21, 113 97 Stockholm,
was appointed auditor of Sandvik AB (publ) by the general meetingof the shareholders on the 27 April 2021 and has been the company’s auditor since the general meeting of the shareholders on
27 April 2018.

Stockholm 11 March 2022
PricewaterhouseCoopers AB

Peter Nyllinge
Authorized Public Accountant
Partner in charge

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Anna Rosendal
Authorized Public Accountant