STOCKHOLM, May 6 (Reuters) – Swedish engineering group Sandvik is considering listing its Materials Technology unit, it said on Monday after announcing plans to separate the business from the rest of the group, a move long anticipated in the market.
Materials Technology, Sandvik’s specialty steel business, has been seen as a spin-off candidate for many years, and has lagged far behind the group’s main Machining Solutions and Mining gear units in terms of both sales and profitability.
Sandvik had previously said it expected to announce its plans for the Materials Technology unit later this year.
“The decision to initiate an internal separation of Sandvik Materials Technology is based on the board’s belief that each part will develop more favourably by itself, increasing opportunities for profitable growth and improving long-term shareholder value,” Sandvik Chairman Johan Molin said in a statement on Monday.
“The board of directors has also decided to explore the possibility of a separate listing at the Nasdaq Stockholm Exchange, should that strengthen Sandvik Materials Technology’s position and future development,” Sandvik added.
Sandvik’s shares were down 2.1 percent by 1146 GMT, recovering somewhat from an earlier drop of 2.8 percent made before the news was announced.
The separation and preparation for a possible listing is expected to take at least a year.
“There is no guarantee that a decision to finally list Sandvik Materials Technology will be taken,” the company said.
The news from Sandvik comes at a time when companies are increasingly focusing on streamlining their businesses, including looking at separations and spin-offs to remain focused on what they view as core operations.
Similar moves in Sweden in recent years have included mining gear maker Epiroc’s spin-off from industrial group Atlas Copco and auto tech firm Veoneer’s separation from airbag maker Autoliv
Materials Technology accounts for around 15 percent of Sandvik’s sales and 7 percent of the group’s operating profit.
Sandvik had sales of around 100 billion Swedish crowns ($10.44 billion) in 2018. ($1 = 9.5760 Swedish crowns) (Reporting by Johannes Hellstrom; Editing by Louise Heavens and Jan Harvey)