1. Definition Return on Capital Employed (ROCE)
KA/Group Business Control

2. Document Information Title: Definition Return on Capital Employed
Description:
Responsible: KA/Anders Östling
Valid as of: 1 September 2010
Reviewed: 1 September 2012

3. ROCE Tree EBIT/Capital Employed = ROCE Financial steering
Internal focus
Financial steering
Growth
Sales
EBIT
Profitability
Costs
ROCE
Fixed assets
Capital efficiency CE WC
EBIT/Capital Employed = ROCE

4. ROCE Follow up
ROCE is calculated on consolidated levels only in order to exclude effects from transfer pricing
Sandvik Group
Business Area ( BA)
Product Area (PA)
ROCE is calculated on a quarterly basis only since monthly closings do not encompass a full balance sheet
Actual – quarterly and year to date
Forecast – quarterly and year to date

5. ROCE Calculations
ROCE is calculated both on a 12-month rolling period and on an annualized three months result
12-month rolling ROCE is the official KPI, used in the CEO-comment and Interim report
The 3-month ROCE might be used quarterly to analyze current trends
12 months ROCE
ROCE =
Where average capital employed is calculated as CB 5 quarters back
Example: Calculation of ROCE Q =
3 months ROCE
Where average capital employed is calculated as: (OB actual quarter + CB actual quarter)/2
Example: Calculation of ROCE Q3 =
OB=Opening Balance
CB=Closing Balance
EBIT 12 month back
Average capital employed
EBIT Q Q3 2010
Average capital employed (Q309, Q409, Q110, Q210, Q310)
EBIT Q*4
Average capital employed
EBIT Q3*4
(OB Q3 + CB Q3)/2