SANDVIK AB REPORT ON 1998 OPERATIONS Invoiced sales rose 24%; excluding acquisitions and currency effects sales were up 1%. Operating profit amounted to SEK 4,595 M (4,370), an increase of 5%. Another strong year for Sandvik Tooling; weaker for Sandvik Specialty Steels in fourth quarter. Integration of the strategic acquisitions proceeded as planned. Profit after financial items was SEK 3,935 M (4,205), down 6%. Proposed dividend of SEK 7.00, unchanged (7.00). Market conditions After a strong opening, the business climate weakened successively during 1998. The rate of increase in industrial production fell from 3.5% on a annual rate at the beginning of the year to 2% at year-end. The business climates in the EU and NAFTA were favorable, but softened in the fourth quarter. A sharp weakening occurred in South America during the autumn and a crisis situation arose in Russia. Economic activity was low in Asia throughout the year, but certain signs of improvement were detected at the end of 1998. Lower prices for oil, coal and metal raw materials had an adverse impact on some important customer segments. Sales

Order intake in 1998 amounted to SEK 41,700 M (34,603), 21% higher than in the preceding year. At fixed exchange rates and for comparable units, order intake declined for the full year by 2% and in the fourth quarter by 10%. The decline pertained mainly to Sandvik Specialty Steels. Invoiced sales totaled SEK 42,400 M (34,119), an increase of 24%. Sales by comparable Group units at fixed exchange rates increased 1% but declined 5% in the fourth quarter. Group sales in Sweden for the full year were unchanged, but increased within the rest of the EU by 8% at fixed exchange rates and for comparable units. In Central and Eastern Europe, the increase was 5%. The favorable development in the NAFTA region weakened successively during the year and, in addition, was affected strongly in the fourth quarter by reduced invoicing of large projects within Sandvik Specialty Steels and Sandvik Process Systems. Invoiced sales in South America were 10% lower than a year earlier due to the sharp decline in the economy during the autumn. Sales in the Asia, Australia market area rose 19% through acquisition. Excluding the acquisitions, sales declined 12%, or by approximately SEK 600 M. Earnings (see appendix 1)Q1-4 1997Q1-4 1998Change %Invoiced sales, SEK M34 11942 400+24Operating profit, SEK M4 3704 595+5as % of invoiced sales13 %11 %Profit after financial items, SEK M4 2053 935-6as % of invoiced sales12 %9 %Net profit, SEK M2 7252 095-23as % of invoiced sales8 %5 % Operating profit in 1998 was affected adversely by the weakened business climate and by: ˇ SEK 400 M due to lower prices for nickel and the resulting pressure on steel prices and writedown of inventories. ˇ SEK 400 M for integration and restructuring measures. ˇ SEK 300 M due to declines in invoiced sales in Russia, South America and Asia. As a result of good productivity and volume development, particularly for Sandvik Tooling, operating profit improved by 5% compared with a year earlier to SEK 4,595 M (4,370), despite the aforementioned adverse effects. After the change in the Group’s capital structure, net financial items amounted to an expense of SEK 660 M (expense:165). As a result, profit after financial income and expenses declined to SEK 3,935 M (4,205). Net profit amounted to SEK 2,095 M (2,725). It was affected by an unusually high tax charge including nearly SEK 400 M related mainly to rulings in tax cases from the late 1980s. Earnings per share, which excluding the additional tax expense would have been SEK 9.65, amounted to SEK 8.10 (10.15). Return on net assets amounted to 16.8% (17.7). Return on shareholders´ equity was 11.9% (14.3) and excluding the additional tax charge 14.2%. Invoiced sales reported by strategic acquisitions carried out in 1997 were SEK 10,300 M. The operating margin was low after taking into account the costs for integration, restructuring and for goodwill amortization. The effect on net earnings per share was negative in the first year.

Business areas (see appendix 2) Sandvik Tooling’s invoiced sales rose 12% to SEK 12,121 M. Business development was strong in Europe and the NAFTA region, but softened in the fourth quarter. Operating profit improved to SEK 2,544 M (2,094), yielding a margin of 21% (19). Sandvik Coromant posted another strong year and increased its market shares. CTT Tools posted very good performance despite the major changes within Precision Twist Drill in the U.S. and lower demand from the aerospace industry. Sandvik Mining and Construction’s invoiced sales amounted to SEK 9,379 M, that is 2% lower than in 1997 (pro forma). Demand for machinery in the mining industry, particular for coal mining, was low virtually worldwide. Nevertheless, demand remained favorable for spare parts and tools. Demand in the construction industry was relatively good, particularly in the U.S. Operating profit amounted to SEK 340 M, and the margin was 4%. It was affected in the third and fourth quarters by ongoing restructuring measures and lower production volumes. The comprehensive restructuring program decided in the third quarter, which within 2-3 years will yield rationalization and coordination gains of at least SEK 400 M per year, is proceeding as planned. Sandvik Specialty Steels’ invoiced sales rose 8% to SEK 11,687 M, mainly due to Kanthal being included for the full year. Sandvik Steel’s invoiced sales were largely unchanged despite prices having fallen 5%, mainly due to declining alloy prices. Order intake declined significantly during the second half of the year, primarily for products with a low level of value-added processing. Kanthal’s invoiced sales declined 10%, due mainly to the prevailing business climate in Asia. Operating profit amounted to SEK 770 M (921), or 7% of invoiced sales. Lower prices and inventory writedowns as a result of lower nickel prices reduced earnings by SEK 400 M. Earnings in the fourth quarter were reduced by production cutbacks due to lower order intake and by restructuring costs. Provisions of SEK 75 M was allocated for planned personnel reductions. Associated companies posted a loss in the fourth quarter. Sandvik Hard Material’s reported increased invoiced sales to SEK 1,455 M (1,361). Sales were strong in the electronics industry, favoring earnings which amounted to SEK 180 M (148), with a margin of 12%. Sales invoiced by Sandvik Saws and Tools declined to SEK 2,694 M (2,787) due to weaker sales in Southeast Asia. Operating profit amounted to SEK 205 M (239) and the margin was 8%. Invoicing by Sandvik Process Systems during the year amounted to SEK 1,892 M, unchanged from 1997 at fixed exchange rates. Invoicing rose sharply in the fourth quarter, due mainly to final delivery of major projects in Japan. Operating profit developed favorably, totaling SEK 132 M (80). The margin was 7%. Group activities include operating expenses for central administration and finance operations and other activities in the Group units not linked to the business areas. Earnings in 1998 are not comparable with 1997 results which included Tamrock as an associated company. Capital expenditures Group investments in property, plant and equipment amounted to SEK 2,811 M (2,353). Acquisitions were carried out totaling SEK 391 M. Structural changes In 1998, Sandvik Coromant acquired all shares outstanding (49%) in Poland’s largest company for manufacturing cemented-carbide tools, Sandvik Baildonit S.A. in Katowice. Sandvik Steel acquired the German company Poppe & Potthoff’s unit for production of stainless precision tubes, with annual sales of about SEK 160 M. Sandvik increased its ownership interest in the exchange-listed subsidiary Sandvik Asia Ltd, from 55% to 73%. In India, CTT Tools started a company for production of high-speed steel tools, Titex India. Sandvik Coromant increased production in China, with a plant for cemented-carbide tools in Langfang. Subsidiaries were formed in Slovenia, Greece, Romania and the Ukraine and representative offices were established in Croatia and Azerbajdzjan. Sandvik Mining and Construction formed sales companies in Bolivia and Ghana. In January 1999, Sandvik formed a joint-venture company in Korea with Suh Jun Trading Co. for distribution of rock-drilling machines and tools. Sandvik owns a 70%-interest in the company which is expected to post sales of about SEK 80 M annually. In January 1999, Sandvik’s subsidiary Kanthal AB acquired the American company MRL Industries Inc. MRL is one of the world’s largest manufacturers of furnace cassettes for the electronics industry. The company has annual sales of SEK 160 M. Financing and liquidity Interest-bearing provisions and liabilities less liquid funds yielded net debt of SEK 8,412 M (7,160 at 31 December 1997). Liquid funds amounted to SEK 1,800 M (2,494) and loans totaled SEK 7,536 M (6,976). Cash flow from operations amounted to SEK 4,595 M and SEK -560 M after dividends and net investments. The number of shares at 31 December 1998 was 258,696,000. Shareholders’ equity amounted to SEK 18,621 M and the equity/assets ratio 47% (47). Shareholders’ equity per share was SEK 71.70 (67.30). Personnel The number of employees within the Group declined during the year by about 900, amounting at 31 December 1998 to 37,520 (38,406). Further personnel reductions will be made in the first half of 1999 as a result of planned structural measures and alignment to the prevailing business climate. Parent Company Parent Company invoiced sales were SEK 12,491 M (12,318) and operating profit was SEK 1,182 M (1,107). Investments in property, plant and equipment amounted to SEK 841 M and the number of employees at year-end was 8,309. Proposed dividend The Board of Directors proposes an unchanged dividend of SEK 7.00 per share (7.00) or SEK 1,811 M (1,811). The proposed record date is 4 May 1999. The Annual General Meeting will be held in Sandviken on 29 April 1999, at 3:00 p.m. The annual report will be distributed to the shareholders approximately two weeks prior to the Meeting. Sandviken, 18 February 1999 SANDVIK AB; (publ) Board of Directors Appendices: 1. Group summary 2. Invoicing and operating profit Sandvik Group’s result for the first quarter of 1999 will be published in connection with the Company’s Annual General Meeting on 29 April. For additional information, please call +46 (0)26-26 10 01.

Group summary, SEK M

	Full-year	Full-year
Income statement	1997	1998
Invoiced sales	34 119	42 400
Costs of goods sold	-22 926	-28 813
Gross profit	11 193	13 587
Selling, general and administrative expenses	-7 111	-8 755
Share of profits in associated companies	300	-4
Other operating income expenses	-12	-233
Operating income	4 370	4 595
Financial income and expenses, net	-165	-660
Profit after financial income and expenses	4 205	3 935
Taxes	-1 283	-1 675
Minority interest	-197	-165
Net profit	2 725	2 095
Consolidated balance sheet
Fixed assets	17 481	19 461
Inventories	10 039	10 350
Current receivables	10 047	9 995
Liquid assets	2 494	1 800
Total assets	40 061	41 606
Shareholders equity capital	17 414	18 621
Minority interests	1 169	872
Interest-bearing provisions and liabilities	9 654	10 212
Non-interest-bearing provisions and liabilities	11 824	11 901
Total provisions, liabilities and shareholders’ equity	40 061	41 606
Consolidated funds statement
Profit after financial items	4 205	3 935
Reversal of depreciation	1 486	2 099
Other	-258	-74
Accrued taxes	-905	-1 153
Change in working capital	456	-212
Net financing from operations	4 984	4 595
Net investments	-5 089	-2 956
Dividends	-1 930	-2 199
Cash flow	-2 035	-560
Key figures
Order intake, SEK M	34 603	41 700
Earnings per share, SEK	10.15	8.10
Return on net assets	17.7 %	16.8 %
Return on shareholders’ equity	14.3 %	11.9 %

Invoiced sales by market area,

SEK M	Q4	Full-year	Q1	Q2	Q3	Q4	Full-year	Change
	1997	1997	1998	1998	1998	1998	1998	%	%	1)
EU (excluding Sweden)	3 876	13 799	4 320	4 107	3 806	4 545	16 777	22	8
Sweden	669	2 231	665	701	417	592	2 375	6	0
Rest of Europe	657	1 888	623	634	604	540	2 401	27	5
Europe total	5 202	17 918	5 608	5 442	4 827	5 677	21 553	20	6
NAFTA	2 756	8 195	2 700	2 730	2 627	2 569	10 626	30	-5
South America	486	1 703	504	481	555	438	1 978	16	-10
Africa, Middle East	412	987	486	429	452	548	1 916	94	8
Asia, Australia	1 823	5 316	1 472	1 397	1 560	1 898	6 327	19	-12	2)
Group total	10 679	34 119	10 770	10 480	10 020	11 130	42 400	24	1

1) Change compared with year earlier excluding currency effects and acquisitions.

2) Change excluding acquisitions.

Invoiced sales by business area,

SEK M
Svk Tooling3)	2 973	10 803	3 154	3 063	2 861	3 043	12 121	12	4
Svk Mining and Construction3)	1 909	3 582	2 342	2 234	2 389	2 414	9 379	/	-2
Svk Specialty Steels3)	3 175	10 780	3 120	3 075	2 570	2 922	11 687	8	-2
Svk Hard Materials	374	1 361	374	343	348	390	1 455	7	3
Svk Saws and Tools	711	2 787	709	632	661	692	2 694	-3	-5
Svk Process Systems	757	1 873	245	332	448	867	1 892	1	0
Seco Tools	763	2 889	819	792	737	803	3 151	9	6
Group activities	17	44	7	9	6	-1	21	/	/
Group total	10 679	34 119	10 770	10 480	10 020	11 130	42 400	24	1

Operating profit by business area,

SEK M
Svk Tooling3)	457	2 094	653	705	607	579	2 544
Svk Mining and Construction3)	105	234	110	132	34	64	340
Svk Specialty Steels3)	198	921	300	248	160	62	770
Svk Hard Materials	41	148	44	55	23	58	180
Svk Saws and Tools	68	239	69	32	39	65	205
Svk Process Systems	43	80	10	10	16	96	132
Seco Tools	174	575	194	170	135	178	677
Group activities4)	64	79	-95	-55	-40	-63	-253
Group total	1 150	4 370	1 285	1 297	974	1 039	4 595

Operating profit by business area,

% of invoicing
Svk Tooling3)	15	19	21	23	21	19	21
Svk Mining and Construction3)	6	7	5	6	1	3	4
Svk Specialty Steels3)	6	9	10	8	6	2	7
Svk Hard Materials	11	11	12	16	7	15	12
Svk Saws and Tools	10	9	10	5	6	9	8
Svk Process Systems	6	4	4	3	4	11	7
Seco Tools	23	20	24	22	18	22	22
Group total	11	13	12	12	10	9	11

3) Precision Twist Drill included from 1 Sept 1997, Tamrock from 1 Nov. 1997 and Kanthal from 1 July 1997.

4) Including Tamrock, consolidated as an associated company until 31 Oct. 1997.