Summit Therapeutics Inc.

A warm welcome to Sandvik's presentation of the third quarter results 2025. My name is Louise Cheddar, Head of Investor Relations here at Sandvik and beside me I have our CEO Stefan Widing and CFO Cecilia Felton. We will do as we usually do. We will start with the presentation. Stefan and Cecilia will take you through the highlights of the quarter. And then we will move on to your questions. And with this, it's time to listen to the presentation. And over to you, Stefan.

Thank you, Louise. And also from my side, welcome to Sandvik's third quarter report in 2025. It's a quarter that's been characterized by a strong momentum and strong demand in several of our key segments. We see a strong demand in mining, in software solutions, Also, cutting tools are up by single digits, and the underlying demand in general engineering has been stable. We have seen strong growth also in aerospace and defense and, however, a weak picture in automotive. In infrastructure, the demand has been mixed, and I'll come back to that later in the presentation. Total order intake grew by 7% and organically we grew by 16%. Total revenues decreased by 4% but grew organically by 5%. We see resilient delivery on the margin considering the significant currency headwinds we have in the quarter. Adjusted EBITDA came in at 5.5 billion, which corresponds to a margin of 19%. And the rolling 12 months is now 19.3 versus 19.2, same period last year. We see continued effect from our restructuring programs with savings of 145 million in the quarter. Adjusted profit for the period amounted to 3.5 billion and we had a good free operating cash flow of 5.6 billion corresponding to a cash conversion of 105% in the quarter. We have launched several key innovations in the quarter. First of all is the Mastercam co-pilot. We launched about a year ago AI-based solutions in several of our softwares. And now we have also launched a co-pilot in our largest software suite, which is Mastercam, increasing productivity for our customers. We've also launched a new jaw plate range, which is actually very important. You might remember about a year ago, we had price pressure in the wear parts in rock processing because this is a very much a commoditized product with a lot of oversupply historically. And launching new products like this to differentiate our offering protects our margin and volumes in the aftermarket business. So this was an important launch. And then AutoMine surface drilling training simulator, yet another module in our AutoMine suite, helping our customers to more easily adopt our new surface drilling solutions. Going into the market and the segments, if I start with a geographical perspective first, we are up 6% in Europe. Cutting tools in Europe is down low single digits. North America, we are up 18%. Here, cutting tools are up double digits. Important to note, of course, that we have a bigger price element than normal in North America because of tariff surcharges. But even without that, good underlying demand in North America. Asia up 18%. Here China was strong with double digit growth as well on the cutting tool side. Also here we have a price dynamic which is a bit unusual, driven by the high tungsten prices. This has already come through also in price increases and therefore higher top line than normal. But also here, even without that price effect, a very solid demand picture. And then we have the mining markets, which all are up, of course, given the strong momentum we see in mining. If we then take this by market segment, of course, mining very strong, continues with strong momentum. We'll come more into that when we go through the businesses. General engineering, I would say a positive in that this has turned from being a negative to now underlying stable. From a PV point of view, it's actually up high single digits. Europe is stable. North America is up high single digits and China is up double digits. And the reason you see a difference between sort of the underlying and the PV numbers, of course, partly relate to what I mentioned around tariff surcharges and price in China. Infrastructure, a bit of a mixed picture. Overall, it's stable at low levels. We did see an uptick in North America, especially in demolition and recycling, where we see some stock filling orders from our dealers, which is a positive sign again now in infrastructure. Automotive is weak overall, I would say. Down low single digits overall. Europe is down low single. North America is down mid single, while China has been stronger, up high single digits. Aerospace is strong across the board with double digit growth in all regions. The other segment here is a bit mixed. We see very good demand in some smaller strategic segments like defense, medical and consumer electronics. The other parts of this is more related to general engineering. So here we see overall a mid single digit growth, Europe up low single and North America and China up in the low double digits. So overall, I would say a decent momentum if we exclude automotive. This converged into an order intake of 30.8 billion, revenues of 29.2 and a book to bill of 105. And of course, noteworthy that it's the third quarter in the row where we have a positive book to bill and thus building order backlog. If we look at it from this perspective with organic and structure, we can see the order momentum in the past quarter has been growing and the revenue momentum is also improving, but lagging the order intake. So I would say we have not yet in this quarter seen the positive effect of the very high order intake we've had in mining in particular in the past three quarters. But of course, something we expect to start enjoying shortly. Then coming to EBITDA, margin again of 19%, 5.5 billion, down 5.6% versus the same period last year. We have good leverage on the volume increases in several of the businesses, also very good price execution, but this is then of course offset negatively by currency. The currency impact came in at minus 837 million, so slightly worse than what we're guided for, and a dilution of 130 basis points. And also, as I mentioned, the rolling 12-month EBITDA margin is now 19.3%. Diving a little bit deeper into the various businesses, starting with mining. As already mentioned, continuous very strong momentum across the board. Equipment growth up 75%. We should be honest here and say it's of course partly due to that we have had a couple of weak Q3s in the past years. Now the momentum just continued and then gave a very strong growth. Also, the service business parts and services grew double digits again, and also digital mining continued with strong momentum and grew double digits. Total order intake then increased by 13% and organically by 24%. If we exclude the major orders we had in the quarter of 1.6 billion, the organic order intake would have increased by 16%. So this shows, I think, good momentum both in the major orders, but also excluding them in the smaller replacement and expansion orders, also very healthy. Adjusted EBITDA, 3.1 billion, corresponding to a margin of 20.1%. Good leverage here on the volume increase, but then negatively offset by 150 basis points due to exchange rates. We also had an impact from the ERP goal we talked about in Q2 of around 30 bps also in this quarter. When it comes to tariffs, we expect them to be fully offset by our surcharges. We also expect a little bit of impact from this ERP go live in Q4. We can come back to that and go through the bridges. Going down into rock processing, also here they saw solid growth in mining. We talked about the infrastructure with a positive acceleration of dealer activity in the US in demolition and recycling as sort of a highlight. So total order intake was flat, but the organic growth was 9%. And excluding major orders, we had some larger orders in Q3 last year. The organic order intake grew by 14%. Adjusted EBITDA of almost 400 million, corresponding to a margin of 15.1%. Very strong organic leverage driven by savings and also the fact that we had some negative pricing in the same period last year related to these wear parts. So a good offset of even also the currency impact of 130 basis points. And also here tariffs for offset. in the quarter. Coming then into machining and intelligent manufacturing, as already mentioned, a bit more of a mixed demand picture with strong growth in aerospace and smaller strategic segments. Underlying demand in general engineering was stable, which we regard as a positive and then a weaker automotive. The organic order intake for cutting tools increased by high single digits year on year, and that's of course partly driven by the lower comps that we had in Q3. Sequentially, this represents a stable development from the second quarter. We also saw strong development in powder with low double digit growth in the quarter on the order side and as already mentioned also double digit growth from the software in intelligent manufacturing. This means that the total order intake grew by 1%, of which organic was 8%. If you look now at the start of the month in October, we continue to see a stable development. Maybe something to say about the development within Q3 here for context. As you know, Q3 is a bit of a tricky quarter with two holiday months and then a long and important September. I would say September came through in a good way for us, meaning it met expectations and delivered solidly in regard to what we expected. That was a good testament that we are now more waiting for things to turn around again, which is good. Adjusted EBITDA 2.2 billion corresponding to a margin of 19.2%. Good price execution, strong savings here in total 116 millions and also here tariffs fully offset but then a negative exchange rate impact of 60 basis points. Here we also had some additional currency effects, which is sitting in the organic column, which Cecilia will explain a bit more in her part of the presentation. And with that, I'll hand over to you to continue the presentation.

Great. Thank you, Stefan. All right. So as usual, let's start with the growth bridge on the right hand side here. And as Stefan mentioned, we had very strong organic order intake up 16% and revenues grew by 5%. Structure was neutral on both orders and revenue, but we still saw significant currency headwinds on both orders and revenues, minus 9 and minus 8% respectively. So all in all, this meant that orders grew by 7% while revenues declined by 4%. Earnings at 5.5 billion, as Stefan mentioned, which corresponds to a resilient margin of 19%. Net financial items came down year over year, and I'll show you a detailed bridge of that in a few minutes. Tax rate excluding items affecting comparability and also on a normalized basis was 25%, so just within our guided range. Networking capital in relative terms continued to gradually come down. On a 12-month rolling basis, we're now at 29.3%, almost a percentage point lower than last year. Free operating cash flow strong in the quarter 5.6 billion corresponding to a cash conversion of 105%. Returns improved year over year while adjusted EPS decline due to currency. If we then continue with the EBITDA bridge and start with the organic column, here you can see that we had a good leverage at group level, 34%, which gave an accretion of 0.7 percentage points. And as Stefan mentioned, though, when you look at the leverage for machining and intelligent manufacturing, it's lower than usual. And one contributing factor to this is that, as Stefan mentioned, we have a currency impact here in the organic column. And the currency impact comes from internal flows in and out of our distribution centers. And these were not hedged. And a few months back, we had a very sudden and sharp strengthening of the SEC, which has then resulted in this currency impact. And the reason why we treat these type of currency impacts as organic is because we want our divisions to work with mitigating these impacts as part of running their business. Now we are looking into improving our processes and hedging these flows. So unless we see another sudden change in currency rates, this is a one-off item. We do, however, expect partland impact also in the fourth quarter from this. If we then take the next column here, currency, you can see that also this quarter we had a significant currency impact on top line, similar to what we saw in the second quarter this year. And we also expect continued currency headwinds on the top line for a couple of more quarters. On EBITDA, we had a negative impact of 837 million, which gave a dilution of 1.3 percentage points. Structure then was slightly accretive, 0.1 percentage points. And all in all then, that brings us from a margin of 19.4% last year to 19% this year. If we then continue down the P&L, looking at the finance net, you can see, as I mentioned, that it's down year over year. This is driven by the lower interest net you can see on the first row here. It's almost half of what it was a year ago. And this is due to a combination of both lower borrowed volumes, but also, as you can see here at the bottom, lower yield cost. The reported tax rate for the quarter was 25.8%. But then, as I mentioned, excluding items affecting comparability and also on a normalized basis, it was 25%. So just within our guided range. Year to date, though, we are at 24.1%. Yeah, if you look at the graph here on the left, you can see that networking capital in relative terms is gradually coming down. We're almost one percentage point lower than last year. And on the right, you can see that it's the business areas, mining and rock processing driving this improvement. We had a strong cash flow in the quarter, 5.6 billion. If you look in the graph at the black trend line, you can see that cash conversion is at 94% on a 12-month rolling basis. When we look at the year-over-year development, EBITDA adjusted for non-cash was slightly higher than last year. CAPEX was a bit lower, but last year we had a significant positive impact from networking capital. And if you look at the bars on the left, you can see that we had some timing impact between the second and the third quarter last year. But this year then a strong cash flow and a cash conversion of 105%. Financial net debt came down sequentially to 33 billion, driven by the good cash flow. And in relation to 12 months rolling EBITDA, we're now at 1.2. And capitalized leases increased slightly sequentially. Pension liability came down, which resulted in a net debt of 41 billion. Looking then at outcome versus guidance, currency minus 837, as we mentioned before. And then looking at a year-to-date basis, CapEx is at 2.8 billion, interest net at 0.6. And as I mentioned, normalized tax rate at 24.1, so in the middle of the guided range. Looking ahead then at the fourth quarter and full year. So for Q4, we expect a continued negative currency impact on EBITDA, minus one billion, based on the currency rates at the end of September. And for the other items, CapEx, interest net and the tax rate, we have left guidance unchanged for the year. And with that, I will hand back over to you, Stefan.

Thank you. Going to the summary. Yes, as we said, we think the quarter is defined by very good order growth momentum and overall good performance in the quarter. Strong organic order intake of 16% with good momentum in key segments. A resilient margin of 19% considering the significant currency headwinds and also tariffs fully mitigated also this quarter. And a strong cash conversion of 105%. But of course also very happy to see that we continue to leverage on our strong digital platform. This is an important part of our strategy and we saw now double digit growth in both intelligent manufacturing and digital mining technologies. We continue to see good progress also on the mine automation side with AutoMine and we have launched several new important innovations in this area in the quarter. I think we can see that we have a very solid foundation and culture that drives strong financial performance and strategic execution. Our strategic initiatives are yielding results. And the decentralized operating model we have is of course even more important in times like this. We can really see that it provides a very fast reaction to the quickly and frequently changing market conditions in the world around us. We'll continue to see this uncertainty, of course, going forward, both geopolitically and on the macroeconomic side, but I believe Sandvik is well equipped to continue to handle these challenges. Thank you. Let's go to the Q&A.

Thank you, Stefan and Cecilia. Good, we saved some time, so we have time for many questions now. So, operator, we can take the first question, please.

The first question comes from the line of Harlow Michael from Morgan Stanley. Please go ahead, sir.

Good afternoon. Thank you for the presentation and thank you for taking our questions. The first one will be on mining. Will it be possible for you to give us an indication on whether we are done with the ERP transition and also if there was something affecting revenues this quarter? And then the second one would be on the growth of SMN. If you could comment on whether we saw some regions accelerating more than others and how we should unpack volume versus price, that would be very helpful. Thank you.

Shall I start with the ERP question? Yes. So this division that is impacted, they went live with a new ERP system in the second quarter of this year. So we're done in terms of going live. We're now up to speed with production again. So no impact on top line. We have some extra costs as we need to fly more of the goods to the end customer as opposed to traditional shipping. We still expect some impact of this also into the fourth quarter. This quarter it had an impact of 30 bps.

Thank you. On growth in machining, or both maybe, but focusing on machining, regional perspective, no, I would say, except for what I talked about, no major changes between the regions. So Europe continues to stay, I would say, muted. We continue to see good progress in North America. maybe we could say that there was a positive uptick in China driven by the different segments I went through. On volume versus price, the only sort of number we are giving here is that we did have 1.4 percentage points on group level from tariff surcharges. And of course, you have a proportion of that going into the machining business as well. That is on top of the normal price effect.

Thank you. That was very helpful. Thanks.

The next question comes from the line of Sinha Chitran from JP Morgan. Please go ahead.

Good afternoon. Thank you for taking my questions. I have three, please. I'll take it one by one. So firstly, on your comment on the mining revenues, given what you see currently in the order backlog, should we expect to pick up in Q4 or will this be more of a 2026 case? Thank you.

Yeah, we are not guiding for revenue, but of course, we, as you know, usually have roughly nine months of lead time. So if we started to see an increase in order intake at the beginning of the year, that should lead to some of that flowing through into the fourth quarter. But I don't want to be more specific than that.

Okay, very clear. Thank you. And my second question is on powder. So, you mentioned that there was a low double-digit growth this quarter. How do you see this developing into Q4? Should we expect a similar or maybe even better development?

Yeah, so same comment there. We don't guide on that going forward. But of course, as long as general market dynamic doesn't change and as long as we don't go the full cycle and start to meet comps, the market should be fairly similar. Then we have to caveat that the powder business is notably lumpy in terms of timing of orders. And there is nothing we have called out in Q3 that it was extra high or low, so to say, but any quarter can be a little bit of a surprise, so to say, given when certain larger orders come in. But as long as tungsten prices stay where they are, ATP prices stay where they are, which is, of course, currently driven by geopolitics, the momentum should be okay in powder.

Thank you very much. And then my final question is just on the margins in machining and intelligent manufacturing. So I understand, of course, that there was the FX headwind, but could you just give a bit more detail on the organic development in this business?

Thank you. Yes, sure. So I think if I take one BA segment at a time, so starting with machining, they had the leverage of 19%, which then includes this currency impact, which It was an effect of around 100 bps in total. Then most of the growth was driven by price increases and surcharges to offset inflation and tariffs. There, you don't get the same level of leverage as you do with volume growth, as those are not necessarily margin accretive in the same way. And then there was a positive impact of savings. So that's breaking down the 19% leverage for machining. For intelligent manufacturing, they had a very strong margin in the third quarter last year, which was a fair bit higher than their margin target of 22% for this year. It was a one-off project delivery that they had last year. So it was a very tough compare for them.

Thanks so much.

Thank you.

The next question comes from the line of Schwerin Gustaf from Anders Banken. Please go ahead.

Yes, hello, Cecilia Stefan. First, I can ask on the mining order intake. If I look at this historically, we've seen method prices leading orders with about one quarter's lag. We're now coming... back of two very strong order quarters for equipment uh if we look at the metal prices where we could argue maybe some supply elasticity they've clearly continued up so stefan in qt we're very optimistic on the backup improving when we ask you about the increased capacity internally would you say now that the the underlying demand is continuing to trend upwards into q4 and 26 that's the first one

Could you repeat that last part? Trending upwards towards Q2 of 26, did you say that? Could you clarify that?

Yeah. Sorry, I have a bit of a cold. That's why I sound like I do. So the last part, if I look at just how our meta prices have led orders historically, it looks like there's still more to give from the outside. So underlying demand here, if we take away the large orders and the lumpiness of the equipment orders, do you think underlying demand is still trending upwards? Yes.

I will say the same thing as I said a quarter ago, that the demand picture is driven by obviously the high metal prices first. And that, of course, has continued to trend in an even more positive direction. It's also driven by the fleet age that is old or high. And then, of course, the more long-term trends such as depleting ore grades. All of these are still in place. Then I don't want to speculate in terms of is the demand going to go even further up or flatten out or so. But I think what we said a quarter ago still holds, meaning we don't see any reason for why the strong market demand would not continue. Then exactly at which level, I don't want to speculate in.

Okay, thank you. Dan, just secondly on machining, I didn't quite catch what you said on the sequential development there. If we take cutting tool volumes specifically, would you say they're quite flat versus Q2 or even up a little bit?

They are stable versus Q2. Then what I want to convey is more that of course Q3 is a very tricky quarter in that you have two low months in July-August and then to save the quarter you need a very strong September. And what we saw last year was that that didn't materialize. That was sort of why the quarter became weak. And if you have a more unsecure sort of economical cycle, that's typically what happens. The summer shutdowns are increased by a week or two, and then that will ruin your September. This year we saw a solid September that came through in the level we wanted. It doesn't mean it's still a stable sequential performance, but I still think it's a little bit of a vote of confidence in that we have troughed out and now more waiting for things to turn upwards. Otherwise, I think we would have seen that in September, some weakness.

Okay, great. Thank you.

The next question comes from the line of Sebastian Cohen from RBC Capital Market. Please go ahead.

Thank you for taking my questions.

I have two.

One is, in the mining OE side, we see ever stronger organic growth, and mining OE now takes a larger share of the overall mining oil intake. Given that there's a certain mix effect coming up, are you concerned that you have to jeopardize your 20% to 22% EBITDA margin in that division, or do you think you can compensate later on with pricing?

I can start. Even though equipment has a lower margin than our aftermarket business, we still get good leverage on incremental equipment sales. So we don't see a risk from that perspective in terms of having to revisit our margin corridor for the business area mining.

Yeah, no, exactly. We can have some mixed effects in a given quarter, a little bit back and forth, but typically it is at levels where we don't even talk about it or we don't talk about it. It's so immaterial.

Very good. Secondly, on the tungsten side and the powder side within machining, can you give us a little bit of an idea how much it contributes to profitability. I can imagine it could be quite distorting in quarters where tungsten prices are very strong and there's some shortage in China and so on. Just for me or for us to understand a little bit what the underlying profitability of the tooling business is.

Yeah, I can start and you can add if you want to. So the powder business structurally has a lower margin than our cutting tools business. When we look at the impact of the powder business in this quarter, though, we can see that, of course, we get a higher share of the powder business. We should dilute the margin, but the higher volumes and revenues and the positive price development also improves the margin of the powder business. So for machining overall, it has a neutral impact. I don't know if you want to add anything to that, Stefan.

It's the same dynamic as the previous one with the equipment. Yes, if you look at it statically, it has a structurally lower margin, but with growth and leverage, as long as the leverage is higher than the average margin, then you don't get the dilutive effect.

Understood. Thank you very much. Very helpful.

The next question comes from the line of John Kim from Deutsche Bank. Please go ahead.

Hi. Good afternoon. Two questions, if I may. Could we just talk about price-cost dynamics in mining? I'm trying to figure out, as we think about the margins or the bridge going forward, how much adjustment we have to do on cost to serve. Things I think I would group in there would include higher OPEX, higher distribution costs, impact of tariffs, non-optimal working capital allocation. Is that a fair comment or how should we think about that and lapping that comp?

I mean, if I look up until now, we have managed cost inflation, tariffs, etc., in a very good way with surcharges and price. So to date, there is no negative impact on the mining from this type of dynamics that you are describing. And we will continue to work with this also going forward.

What I would add to that, I would make your reasoning a little bit more simple and just say, we have said that we should have around 30% leverage in the mining business. And that is, of course, factoring in all the things you mentioned, that we need to do capacity expansions and invest here and there. But that is factored into that leverage number. So I would make it more simple and just say 30% leverage is what we're aiming for.

And just a quick follow-up, if I may, if you think about the strength of your equipment order intake for the first nine months this year, how should we think about the load on your factories and perhaps OPEX required or CAPEX maybe?

Yeah, I think what we have done, which we started with at the beginning of the year, is to ramp up capacity when we saw sort of an expectation of higher demand. And I would say the divisions did it in a good way in the sense that they also, even though we didn't have the proof points at that point, ordered a higher level of key components such as engines and so on then we may be needed at the time to secure those vital components, which is usually where we get the bottlenecks. And then gradually as the order intake has come in, we have also ramped up production. We have increased with production lines. in both Finland, in Tampere and Turku. And we have our Malaysia factory for load and haul, which was already in the process of being ramped up. We have some additional capacity also coming online in India. And also our partners that are also helping us build machines. And that is already coming online as we speak. So we are seeing higher throughput. And in a sense, it's already in our cost base, that higher operating level. And we are not foreseeing that we will not be able to meet the demand we see currently. I think the divisions have done actually a very, very good job in wrapping up in a controlled and quick manner. So we are quite pleased with that.

Great. Thank you.

The next question comes from the line of Edward Hassi from UBS. Please go ahead.

Hi, Stefan and Cecilia. Thanks for taking my questions. Just three, if I may. So first up, could you just talk through how US demand for metal cutting tools developed through the quarter and whether you saw any signs of a slowdown in September?

I would refer to what I said that September overall came through exactly as we needed it. And if the US would have weakened off, that would have been visible in the numbers because it's such a big market. And as we also mentioned, overall, US did well in the quarter with double-digit growth. Albeit some of that is, of course, tariff surcharges. So, no, we cannot say we saw a slowdown towards the end of the quarter, no.

Okay, thanks. That's helpful. I mean, it's interesting to see such a strong order intake in the U.S. on the mining equipment side. I mean, were there any specific projects that drove this? And did this have anything to do with the 10 projects that the U.S. administration earmarked for accelerated permitting?

I don't think so. Meaning it's not been called out in any way. And I think even if they say they are accelerating them in this industry, accelerating means it will take a few years less. It doesn't mean it will happen this quarter. So I think there is overall a good momentum in the market. partly driven by the dynamic you describe, that there is a strategic, let's say, ambition and focus on more domestic supply. But I don't think these 10 big projects were part of it, to my knowledge.

Okay, that's very helpful. Thank you. And then just final question I saw in post-release, you mentioned seeing positive pricing in China for the first time in a long time. Firstly, with this, I mean, from your competition, that is, is this on the metal cutting side? And secondly, do you think this is driven by anti-involution in China?

Yes, it's cutting tools, to be very specific. What we have seen is, I mean, we have some Chinese competition that has been operating at extremely thin margins, if any margin at all, for a long time. So it has been very tough from a competitive point of view, which is why we did the annual acquisition last year to have a good horse to play, so to say, in terms of competing against that. What has happened now with the high increase in tungsten prices is that they have gone completely underwater and been forced to raise prices for the first time in a long time. And the good thing with that is even if we are of course impacted by similar dynamics, it does change the dynamic in the market when also the local players start to increase prices significantly. because then you sort of end up in a different discussion than that any price increase is a big no. Then you can start to negotiate from there, and it does create a different dynamic. For us, I would say it's positive.

Okay, that's very helpful. Thank you.

The next question comes from the line of Rory Smith from Oaks Cup. Please go ahead.

Hi, good afternoon. It's Rory from Oxcap. Thank you for taking my questions. I just wanted to ask, in mining, the report mentions strength across brownfield, greenfield, and replacement. I just wanted to know if you'd be willing to put some numbers to that, either sort of levels of split or relative growth rates in those three areas. And I've got a follow-up on mining as well. Thank you.

Yes, of course. So we saw particularly strong demand in brownfield. It was 70% of the order intake. Usually it's more around 50%. On the other hand, we saw a weaker quarter for greenfield. It was down to around 5%. It's usually around 15%. On the other hand, in Q2, we had a big order, so it was 25%. So this can really... I mean, the greenfield can vary over the quarters, depending on when we get larger greenfield orders. And then replacements were around 25%, and it's recently been more hovering around 30%. What I think you should take away from this is rather that it was a very strong brownfield quarter and that sort of pushing down the percentages on the others, not that it was weak in greenfield replacement. So very strong brownfield quarter.

Understood. Very clear. Thank you. And then just my follow-up on that, to follow up on a previous question around the margins there, would you be willing to put a mixed headwinds slash tailwinds uh number to you know if service versus equipment moves one percentage point in the mix what's the sort of relative uh headwind or tailwind to the margins is that something we should be thinking about in terms of modeling this out

No, I think it comes back to what we said before that even though when we get a higher share of equipment sales, we still get a good incremental leverage on those additional equipment deliveries. So typically it's quite a small number. I think looking into the next coming couple of quarters, if I take a little bit more short term, it's more the currency headwind that has the biggest margin impact on the mining business.

That's very clear. Thank you for taking my questions.

The next question comes from the line of Vlad Serjivski for Berkley's. Please go ahead.

Yeah, good afternoon. Thanks for taking my questions. I'll go one by one. First of all, you're obviously focusing on ramping up capacity in the mining business. Can you give us some idea of the magnitude of this ramp up you're working on? Is it 10 percent, 20 percent? Is it something else?

I was going to say it's nothing, of course it's something. But we have a very flexible production setup. First of all, worth noting, 70% of the cost of goods in mining is purchased components. The rest is related to assembly. Of the assembly, roughly 50% is outsourced with partners, and the rest we do in-house. And what we do in-house is basically assembly, so it's people with wrenches and power tools. So very limited in terms of capex and the cost is basically labor and space. So it's nothing... Nothing material at all in terms of investments. And the cost, so to say, of course, just rolls into the cost of goods sold. So if we do this in a timely manner, we shouldn't really see any margin impact in that sense.

Absolutely, Stefan. I was more thinking about volumes we're talking about, right? Because obviously your new equipment order intake is up about 50% in the first nine months of this year. I assume there is some order book extensions. So it's unlikely there will be a point when the growth in new equipment revenues will be 50%. But I was trying to understand what this growth could be. Is it 10, 20, 30%? That's the nature of the question.

Okay, and of course, then we come into the revenue guidance, which we don't really do. So you will have to, you will have that sort of, how this converts into revenues over the quarters is not something we can guide on.

No problem. Can you also give us some color on the strength of demand across different commodities, maybe splitting into gold, base metals, including copper and bulk commodities, iron or coal?

Now, of course, the main demand increase is coming from the commodities that have had the best run, so to say. So gold and copper, which of course, gold for us is around 35%. Copper adds another 25%. So 60% of the demand or our business is gold and copper. And that's where you see the biggest strength. Then there are several other commodities that are maybe not as big, but still significant in silver, platinum, palladium. You might have seen some orders we have announced in Southern Africa, not South Africa, but in Southern Africa, which is very much platinum and palladium, where we have a very strong position. So might be small commodities as such, but can be important from a business point of view. Then if you go into the bulks, of course, iron ore prices are okay. And many of the larger producer, of course, making good money. But it's not any exceptional levels whatsoever. So it's more of a replacement demand picture. And some of the other bulks like coal, for example, is of course down. So much less investments there.

That's great. Final one from me. Could you please update us on your drilling rig offering on the surface side and specifically on large surface drill rigs? Did you manage to win first sizable orders over there? How material are those orders if they are? And what sort of market share can you envisage Sandvik having in large surface drill rigs in two years' time, three years' time?

Yeah, when you say big, I assume you mean the rotary drill rigs, which of course, as we have said also at the Capital Markets Day, is a priority area for us in terms of growth. I would say it's the last part where we are not really happy with our market share in terms of what we believe is our potential. Right now, roughly 20%, maybe a little bit more. It's something we intend to grow. We have had very solid order intake on that side. We haven't announced specific names, but one of the bigger orders that we had this quarter was related to a quite significant rotary win, which was a customer we did not have before. So I think we're making good progress, but we still have a way to go. And we're not giving any specific targeted market shares, but what we have said is we want to establish ourselves as the clear number two while we come from a position where we were more sort of battling for number two spots. So that's our next sort of strategic goal.

Excellent. Thank you very much.

The next question comes from the line of Claes Berglind from Citi. Please go ahead.

Thank you. Hi, Stefan and Cecilia, Claes at Citi. So my first one is on the aftermarket growth in mining when you exclude ground support, parts and services up double digit. Stefan, did you see an acceleration in the parts growth this quarter? And was this linked to accelerating activity at the miners, higher production, or would you say that this was Sandvik specific? I'll start here. Thank you.

This is the bumblebee that continues to fly. I think we had a similar momentum in the second quarter. Well, we have had a similar momentum for a long time. Sometimes it's high single digits, sometimes it flips over to double digits. It's been a very long positive trend and I think the drivers are the same fundamentally. We're gradually continuing to increase our fleet. What we have seen lately or the past year is that the surface, our larger surface business that we have earned over the past years is now converting also into more aftermarket business. We have the automation and digitalization which also drives more aftermarket. It creates more stickiness with customers and there are more things to service and replace. And then on top of that we have of course the high metal prices and the desire for customers to run their equipment to the maximum. and some of which are quite old. So all of these things are contributing to this momentum.

Got it. Then on the brownfield comment, is that that it was quite high share in the quarter? I guess that must be linked to golden when you saw more momentum, given your solid exposure, given that greenfields are more on the copper side. And then I will try you again on the lead times here in mining and revenues ahead. Would you say that these are getting longer, or should we use the normal lead time, which I think in the past has been around 9 to 12 months?

That range is still valid. Maybe we are now a little bit at the higher end of that range, simply because we have been ramping up and need to catch up a little bit. But we're still within that range.

Got it. And then very quickly, coming back to the powder, less than 1% of the 8% organic order growth, it was growing low double digits. Can we talk a little bit about the dynamics here again? If we stay at the current prices, could we see a bigger impact here into the fourth quarter, given the framework agreements you're running, or are we simply overestimating the impact on growth as tungsten on the raw side is not being up as much as the APT prices in the quarter? Some insights would be very helpful. Thank you.

Did you get that?

No, can you repeat?

Can you repeat that question, Claes? It was a lot of aspects in your question.

Yeah, so obviously we have APT prices and then we have tungsten and then you have the framework agreements. And sometimes it's tricky to get this right relative to the big move we have in the prices. So my question is, if we stay at the current level, could we see the impact to Sandvik's growth in machining and in telemanufacturing be a bigger impact at the current level, i.e. with a lag into the fourth quarter?

Yeah, I would say it's, I think it's tricky to answer from the perspective that you end up with, okay, what was the comp and so on in the previous period. So the way I would describe it, and please help me out if you have more, but of course, if the prices stay where they are, Underlying, I mean, we will be at the plateau level. Then you have the comps, of course, that can play a dynamic here. But then, as you rightly saw, we have framework agreements. Some of them are written maybe for 12 months. They are, of course, protecting us from increase in ATP prices that we get through sort of immediately. But what they are not capturing is if there is also general scarcity in the market, which there is today, then we cannot change prices on top of what the ATP prices have moved. But of course, we are operating the largest smelting and refinery operation for tungsten outside of Asia. And of course, it checks all the boxes if you're into ESG aspects. uh non-sanctioned sourced material and what have you so we see of course a very strong demand also from peers and competitors to source from us because it's one of the few sources that is available that we can currently not capture or or that takes longer to capture because of the way the contracts are being set up. And the reason we have this longer-term contrast is, of course, because powder is a notably very volatile, lumpy business with a lot of, what do you say, bullwhip effects in the supply chain. So it's really to protect us from the downside risks when things turn more sour. And then we have to live with a limited upside for a while. So there is more that could come if the prices continue where they are, if the scarcity continues as we can work through and get paid for our ability to deliver.

And we can see also for spot orders, there we are just pricing continuously. It's normally a one-month lag between APT prices and our pricing. But we work with that on a monthly basis, on a regular basis.

Perfect. Thank you.

The next question comes from the line of James Moore from Rochefield & Co. Please go ahead.

Yes, good afternoon, everyone, and thanks. Could I do a quick follow-up on powder? Could you just say how much of the low double-digit organic sales growth was price versus volume, given the tungsten comments? And maybe I'll go one at a time.

Can we? I'm not sure. Price was a big part of it in orders this quarter. We'll leave it at that. Price was a big part.

Okay, thanks. You talked about stickiness in mining aftermarket earlier. Could you update us with where the penetration of your own installed bases these days? I mean, it was five years ago or something. Has it gone up?

Yes, it's gone up. I think five years ago we said we had roughly 50% penetration. Not 50% of the machines, but if we say that the total addressable market on our machines is 100, we said we had roughly 50% of that. That's been going up and it's now more towards the 60%.

That's great. Lastly, if I could, I don't know how to ask this question. I was just thinking about the duration of a mining capex cycle, if we say we peaked in 12 and what's really been a capital disciplined environment up until late, what, Greenfield, you tend to see new projects and capital announcements from the likes of Rio Valle and co. What sort of lead indicators do you see on Brownfield? Like the good Brownfield orders that you've seen recently, Was there something that signaled that or was it just reactive at a function of moving copper and gold prices?

Typically, if you take brownfield orders, we have had them in the CRM system for a while. What is always tricky to know is when the customer will pull the trigger. And what we have seen now, obviously, is an acceleration of that. I mean, we know they're looking at whether they are replacing a number of machines or an expansion. So we typically have it on the radar. But how quickly they convert that is sort of what is difficult to project. And obviously, with these prices, they have been able to convert it quicker. There are, of course, so-called surprise orders as well, but that's fairly rare considering how close we are with staying to our customers.

And given what's in your CRM system, and given where copper and gold prices are, what I'm struggling with in my mind, and I suspect a lot of people are, is the very high equipment orders in mining in this quarter and last. It's going to be quite a tough comp next year. Do you think that's a comp that you can even grow off, or do you think that will be a challenge, and that's likely to be a tough comp that you decline from on equipment orders at everything you know today?

Well, you know, if you're worried about the comp next year, you will never be happy. So I think we worry about that in Q3 next year. But of course, as I said, part of the high growth, the 75%, which is of course abnormally high, is partly because we had a fairly low Q3 last year and the Q3 in the year before. We typically have a little bit of weakness in Q3. Now we didn't see that at all, which speaks to the momentum. But if you look in absolute terms, I mean, Q2 was actually bigger than Q3, even if the growth number is higher now in Q3. So I don't think it's an abnormal number in terms of the absolute number. So, I mean, yeah, I don't know. Let's see where we are a year from now when we think about the comp.

All right, so we will have to leave it at that. The time is two and we need to end this webcast. Thank you all for calling in and for very good questions as usual. And have a good day.