Sandvik AB (publ)

Hello everyone and welcome to Sandvik's presentation of the first quarter results 2025. My name is Louise Tjöder, head of investor relations and beside me I have Sandvik's CEO Stefan Widing and CFO Cecilia Felton. We will do the normal procedure, meaning Stefan and Cecilia will start with the presentation and take you through the key highlights of the quarter. And after that we will move on to the questions. And with this I hand over the word to you Stefan.

Thank you Louise and also from my side welcome to our first quarter report in 2025. If we start by summarizing the quarter we see good momentum in the mining business while cutting tools and infrastructure continue to be impacted by the uncertain macro environment. Also positive is that manufacturing software continues to grow at mid single digits. Total order intake increased by 2% and of that the organic growth was 2% and revenue increased by 1% and of that organic was also 1%. We improved our financial performance on all key metrics. Adjusted EBITDA margin improved by 1.5 percentage points corresponding to a margin of .7% and the rolling 12 months margin is now 19.5. We see in particular a very strong positive impact from the restructuring programs and savings that we have had and this quarter the positive bridge effect was 307 million. Adjusted profit for the quarter was 3.8 billion, 3.3 billion in the same period last year and the free operating cash flow was 3.8 slightly improved versus the same rounded number of 3.8 last year. We also continue to focus on our strategy execution and made good progress. Several innovations launched with focus on electrification and also nine acquisitions announced in the quarter which I will come back to in this presentation. If we start with innovation a very important launch in the quarter where we have been lagging an offering for cable electric rotary drill rigs and now we have launched an electric option for our entire range of automation ready rotary drill rigs. So this fills an important gap in our product portfolio and is part of our ambitions to to improve our market position within surface mining. If we then take a look at the regions and segments as usual starting with the regional view first. Europe was down 8 percent, here cutting tools was down 7 percent, North America was up 4 percent, cutting tools down mid single digits, Asia up 9 percent, China cutting tools down low single digits while Asia was flat driven in particular by a strong performance in India. And then we have more of the mining markets with Africa, Middle East up 2 percent, strong performance in Australia up 12 percent and South America also strong at up 8 percent. Looking then at the segments you can see that mining has had a strong performance. We believe the market momentum has improved and in particular strong performance this quarter in Australia and South America. General engineering weak down mid single digits overall also down mid single in both Europe and North America while China saw an improvement in general engineering of up mid single digits while Asia was more flatish overall. Infrastructure I would say is stable but at muted levels as before. We continue to see more positive picture in North America but of course that is also more risk going forward of course in North America giving everything that's happening there. Automotive down and this was the most negative segment in the quarter. Down low double digits overall. Europe down low double, North America down low double and China down a little bit better but still down high single. Aerospace positive sentiment there up mid single digits in Europe, North America underlying flat in reported numbers down mid single digits where we continue to see a slow pickup of order intake from the largest customers that is clearly working through some inventories and then also negative in China with low double digits in aerospace. The other segments a bit more mixed picture overall down low single digits, Europe down low single, North America up the double digits driven by some specific segments like rail that was positive in the quarter and then Asia down mid single digits. So overall a mixed picture in terms of the demand across regions and segments. If you summarize this then we see an order intake of 32.8 billion in the quarter revenues of 29.3 which is a healthy book to bill of 112 percent in line I would say with seasonality but a healthy book to bill still. If we look at this from a slightly different perspective then we can see that this was the fourth quarter in a row with positive organic order intake and that has also gradually translated into now a positive organic revenue growth of one percent where we were flat in Q4. Margin development strong 19.7 percent and in absolute terms up nine percent to almost 5.8 billion I would say this is a good margin level considering quarter one is always seasonally low from a volume point of view. We see strong leverage in all business areas on the back of the structural savings and good cost control we have had and we are also supported in this quarter by currency accretion in most of the businesses. Mining and rock solutions strong organic order intake 26 percent up in equipment double digits growth in parts and services again aftermarket growth two percent but excluding a major order in aftermarket last year up five percent so here you see a little bit of difference between parts and services and the consumables in the aftermarket but overall very strong performance. We had major orders totaling almost one billion excluding major orders organic orders intake was up seven percent if we include them it was up ten percent. Very strong margin performance 20.8 especially then given that Q1 is a low volume quarter from an invoicing point of view so good leverage positive impact from savings and I would say overall surprisingly good with a very clean quarter from an execution point of view. We had help here from savings and also from exchange rates. Already mentioned the important product launch for the electric rotary blast hole drill rig range and also want to highlight that we continue to see good demand from our digital solutions in the quarter. Rock processing here demand in mining continues to be stable while infrastructure then continues to be at a lower activity level especially in Europe. Total order intake decreased by three percent which the organic decline was two percent but if we exclude major orders it was a positive development with plus two percent. Good margin improvement as well at 15.1 good savings realization and contribution from the savings programs in particular also here support from currency. Also here we launched a new important product in the in the field of electrification a mobile electric cone crusher that will support our organic growth journey for customers that prefer electric options. We also announced in the quarter the acquisition of OSA demolition equipment which gives us a full range of demolition and recycling equipment for attachment tools. This is something we have already had in the assortment before but then it's been a traded product through this acquisition we are bringing this in-house which is supporting both technology development and long-term from an opportunity point of view. Then going into manufacturing and machining solutions industrial activity continues to remain at the low level. I already went through all the segments also mentioned that software continues to grow at mid single digits driven by strong performance in the US while powder in this quarter declined year on year in mid single digits and here you know we had a very high order intake in Q4 we mentioned then that some of that might be timing so I would say we that is most likely the case here that this is timing between the quarters. Overall demand for powder is good and we'll come on to that also and we talk tariffs and restrictions imposed by China that is likely to have a positive impact on us. Total order intake decreased by three percent organically down six percent and if we look at cutting tools then overall down mid single digits and this represents a stable development in dailies compared to the fourth quarter so overall market situation I would say stable going from Q4 into Q1 also if we look at the end of the quarter we didn't see any specific effects such as pre-buys or declines and when we look at the start of April in the first two weeks we see the daily order intake being stable compared to what we would expect from normal seasonality and dynamics around beginning end of months and so on. I want to highlight though I always say this we always report what we see in the first two weeks and of course the external events in the world means that drawing conclusions from this is more difficult than it has ever been but this is what we see so far. The margin in SMM was strong given the volume declines 20.9 percent improvement versus last year again similar story very good cost control quite material positive impact from the restructuring programs here slightly less help from currency and also some dilution from structure. Mentioned acquisitions we have acquired seven resellers cam resellers in quarter and this is an important strategy it's very very value accretive acquisitions overall it supports our customer relations as we get closer to our customers and it also supports the synergy realization when it comes to cross-selling among our different software brands and this is something that Mattias will talk more about at our capital markets day in May. We also wanted to give you some more flavor on the tariff situation and an update on that. First of all and I think a key takeaway is that at the current tariff rates the one that are in effect here and now we expect a limited margin impact based on all the activities we are doing to or have done to mitigate this. I would say the main risk for us as we see today is the overall impact on the global economy which of course is as difficult for us to predict as it is for you but that is today I would say the main risk not the tariffs themselves. We have here a number of examples of mitigating activities and of course all our divisions have different exposures and different footprints so this is not a list that applies to all of them but these are examples of activities our businesses are taking. We for example have very limited flows between China and US but those that we have had are being mitigated for example through supply chain activities. We are rerouting flows that today might go through the US and then into Canada and Mexico because that has been a tariff free zone and also of course we are not allowed to export goods directly to Canada and Mexico. Tungsten raw material is exempt from tariffs currently but there has been earlier in the quarter export restrictions placed on this raw material by China and that we have seen has led to increased demand for tungsten outside of China and as you know we are one of the major providers of that raw material in the world mostly for our own internal consumption for drill bits and cutting tools but we also sell externally so this is a potential upside depending on what happens with this going forward. We have put in tariff clauses and revisited our commercial agreements where applicable. We have also notified customers and partners in several of our businesses of potential upcoming tariff surcharges. We are rebalancing product capacity where in some cases we might produce today in Europe sending to the US and vice versa we produce something else in the US and sending to Europe and of course depending on the tariff levels that's something that will be rebalanced. We will also if needed increase production capacity in the US but currently we don't really see a need for that but if tariff rates would increase materially that will also be something we would look at and I want to be clear here we're talking about existing manufacturing footprint that we have already in the US increasing capacity and that there is no need for any type of green field investments. So overall current situation I think is very much manageable but there is of course a risk to the overall global economy. I will with that hand over Cecilia to take us through some more details.

Yes thank you Stefan so let's dive into the numbers then in a bit more detail together and as you should let's start with the growth bridge and as Stefan mentioned you can see here that organically orders grew by two percent and revenues by one percent. Structure contributed positively with one percent on both orders and while currency had a negative impact of one percent and in total then orders grew by two percent and revenues by one percent. Adjusted EBITDA grew by nine percent reaching 5.8 billion corresponding to a very good margin at 19.7 percent. Net financial items came down year I will show you a detailed specification of that in a few minutes and the tax rate both excluding items affecting comparability and also on a normalized basis was in line within the guided range. Networking capital just below 30 percent cash flow 3.8 billion corresponding to a conversion of 70 percent in the quarter. Returns improved and excluding amortization of surplus values it reached 16.7 percent in the quarter and adjusted EPS also improved to 3.01 SEC. If we continue then with the bridge the EBITDA bridge and starting as usual with organic column as Stefan mentioned we had a highly positive leverage in the quarter although as you can see on small numbers nevertheless this gave an accretion to the margin with 0.6 percentage points. Currency also had a positive impact one percentage point accretion while structure was neutral to the margin and then that brought us from a margin of 18.2 percent last year to 19.7 percent this year. If we then continue down the PNL looking at the finance net as I said this came down year over year from about 500 million to 300 as you can see here and this is mainly driven by the lower interest net and that's due to a combination of a positive currency impact lower interest rates and also slightly lower borrowed volumes. As I said tax rate both excluding items affecting comparability and on a normalized basis came in at 23.8 percent so pretty much in the middle of the guided range. If we then continue looking at the balance sheet and networking capital in relative terms you can see here in the graph on the left that we are just below 30 percent. In absolute terms though if you look at the bars you can see a sequential step down versus the fourth quarter. This was driven by a currency in terms of networking capital volume we had a normal seasonal increase driven by inventory that which is typical for the first quarter of the year. Cash flow then if we start with looking at the year over year development in the in the table you can see that EBITDA adjusted for non-cash items was slightly higher compared to last year. CAPEX was a bit lower and then as I mentioned we had a normal seasonal build up of inventory here beginning of the year and then that resulted in a free operating cash flow of 3.8. billion and in the graph you can see the trend line that on a 12-month rolling basis cash conversion is at 93 percent. Financial net debt came down slightly sequentially from from the fourth quarter this was driven by the cash flow and also our balance sheet target metric financial net debt over EBITDA came down to 1.1 in the first quarter. We ended last year at 1.2. Capitalized leases came down or decreased a little bit sequentially driven by currency while the pension liability was largely unchanged and that resulted in a net debt of 40 billion. If we then look at outcome versus guidance currency for the quarter came in at 237 million CAPEX 1 billion, interest net 0.2 billion and the normalized tax rate as I mentioned pretty much in the middle of the guided range. And then if we look ahead at the second quarter and the full year we expect a negative currency impact of minus 600 million in the second quarter based on the currency rates at the end of March and for the other items CAPEX, interest net and the tax rate we have left the full year guidance unchanged and with that I will hand back to Stefan for some more information about the summary and conclusions.

Thank you Cecilia. Yeah so if we conclude we saw mixed demand in the quarter with strength in mining, continued order growth in software while cutting tools was impacted by the weakness in industrial activity although stable then sequentially from fourth quarter. We see improvements in all financial metrics, good margin performance with good cost control and good savings realizations and I think we show in the quarter again the proven resilience both on the top and bottom line and will of course continue to have focus on executing in an agile way in this dynamic environment. We continue to execute on our strategy several innovations launched in the quarter. We have strengthened our positions in CAM further with the seven reseller acquisitions and also strengthened our position and offering in demolition and recycling. I think we all know it's a challenging geopolitical and macroeconomic environments that we are in with tariffs and barriers to global trade. I do think we continue to show that our setup we have a global footprint with manufacturing in all key regions, strong customer relationships and market leading innovations means that we are well placed to manage this situation in a good way and we will continue to leverage this platform to deliver on the targets we have communicated and our strategic ambitions. I know it's a lot of focus on the short term now but of course we are really pleased to be able to talk more about the mid to long term view as well at our capital markets day in May on many of these topics so I think I will see many of you there. Thank you.

All right thank you Stefan and Cecilia. It's now time to open up the Q&A session so operator please can you coordinate the first question.

Thank you madam. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue you may press star and two. Participants are requested to disable the loudspeaker mode while asking a question. Anyone with a question may press star and one at this time. Our first question comes from James Moore from Redburn Atlantic. Please go ahead.

Yes good morning everybody afternoon thanks for the time.

Can I ask two questions please? I was surprised about the stable comment for SMM of the first two weeks of April. I wondered if you could dig into that a little bit in two dimensions really on timing and geographically. I'm just wondering whether there was any sign of the US demand deteriorating and whether that's been offset by better performance in other geographies like Europe, Asia and Africa and if you could quantify that and whether you see any growing signs of a US capex freeze just because the tariffs were not implemented at the beginning of the first two weeks of April they've come in more belatedly and I want to sense that date whether there's been a change. That's really maybe we can take them one at a time that's the first question.

I understand your question and I mean I can tell you we were also nervous waiting for these numbers to come in during these first two weeks but I mean the only thing we can say is we don't see any any any abnormal activities so to say and that goes also across the geographies. It's very much the levels given you know if we go from Q4 to Q1 stable dailies given what we then expect in the first two weeks of April that's also what we see. So yeah it's difficult to really put more color to it since it is nothing really to call out. The only thing we are calling out is of course that we understand the let's say the the overall uncertainty and and maybe expectations that things will change but we can only say what we see here now and it is stable.

That's very helpful and then the second one is could you elaborate on the maths behind why you think there's no margin impact and tied to that how are you handling US cutting tools that come from Chimo? Are you putting all of the tariff onto the price and is the market accepting it or are you doing something else to react?

Yeah you want to start

with that? I mean when it comes to the margin impact and the reason why we don't why we expect a limited impact based on the current rates I think those are the reasons that Stefan went through in the presentation so the example bullets that we saw there so it's redirecting flows using our existing footprint looking at customer surcharges rebalancing what we produce where in the world so it's really what you saw in those bullets that are the reason for that.

Yeah how much of the kind of I got the sense that the majority of your US business came from in SMM came from Chimo Sweden so I guess the question would be how much of that are you able to relocate to coming from other geographies or is it more that you're taking it through Mexico and Canada?

No we have an in-surch plant in the US as well and that is of course something we can leverage both when we when we talk about rebalancing of the production but then of course we also can address this through pricing and it's a combination of all of these things.

Okay thank you very much.

The next question comes from John Keam from Deutsche Bank please go ahead.

Hi good afternoon thanks for the opportunity too if I may if we took your Q4 orders and Q1 orders together for metal powders and we were to think about the year on year would it be flat up or and could you comment on

volumes? What do you mean volumes in?

In metal powders so if you were to kind of neutralize the price effects is the metal powders demand up if we adjust for seasonality or pre-buying or however you want to phrase it?

Yeah I would say if you if you combine the growth in Q4 with the decline in Q1 you would still have net positive impact not net positive in the overall and so I would say it's a positive trend we are not separating out price from volume in powder specifically but also volumes are up and I would say as I mentioned that we are seeing rather an increased sort of interest in our powder since China is limiting exports of tungsten powder and we are one of relatively few non-Chinese suppliers in the western part of the world so yeah let's see where that goes but that's a potential positive at least.

Okay very helpful and second question if I may you previously talked about the the the steps you're taking the levers you can throw to optimize for an uncertain tariff world how should we think about this on your cost structures or cost margin evolution this year?

Yeah I mean with the current tariffs levels we're not expecting a material impact also if we look at we initiated the summer structuring programs both last year and in 22 and we had realized most of the run rate savings at the end of last year but it's still as in this quarter but also coming quarters during the year there's still a positive bridge effect coming through from from those restructuring initiatives also supporting leverage then throughout the year.

Okay thank you very much.

The next question comes from Klaus Bergelin from Citi please go ahead.

Thank you hi so I want to come back to tariffs but I want to ask a little bit about supply chains I just wonder if you have started to see some disruptions yet you might not have a direct impact that can impact you indirectly in the supply in the assembly end of the business if you start to see shortages of components I have one more but I'll start there.

No I cannot say that we are seeing any impact of the kind you describe here not at the moment at least. Okay that's good then

my

yeah

my my exactly that was a short answer my my second one was on the defense business it's a small part of smm but it's arguably very cutting tool intensive and should be growing a lot at the moment it sits within other how big is it today and what is the growth there currently I mean like we've seen with the powder business it's small but growth can be meaningful and I guess every little bit helps so interested in that thank you.

Yeah thanks a good question and I'll pass on it now it's something we will show some more numbers on at the cmd because of the interest in defense and it is so positive definitely but we are doing a bit more deeper let's say analysis because of the historical historically it's maybe not been as much focused so we have defense business sitting in some of the other segments as well and we are cleaning that up and we'll come with a more let's say sort through view at the cmd in may so I'll you'll have to wait until then.

Sounds good very quick one on on mining my final one is the arrow is now pointing upwards could you comment here across the commodity steels on to what extent gold versus copper are sort of developing more favorably quarter on quarter.

No I think both of them are positive I mean gold obviously at record high but copper is also at very healthy prices even if it came down a bit in the past weeks it basically only came back to where it was a few months ago and with the long-term cycles we see customers in both of these commodities going at full speed to take maximum advantage of the current prices.

Thank you

thank you.

Next question comes from Sebastian Kuhne from RBC capital please go ahead.

Yeah hi thank you for taking my questions I have three hopefully short questions and answers first is on capacity utilization in smm I mean you adjusted capacity last year q1 but since then we have like five percent drop in organic volumes and what's the utilization there at the moment with my first question?

Yeah I mean of course there is some under absorption in these numbers that's a given considering where we are on the on the volume side but we we had quite significant programs that we launched beginning of last year on top of also previous programs so I think we have done a lot to mitigate this which you can also see in the numbers and whether we need to do more going forward that remains to be seen I think let's see now what happens overall in the market but I think right now we are quite comfortable with with the balance that we have but yeah let's see going forward.

Okay second is on currency I mean we go into a major currency headwinds time now I calculate up to minus 10 percent currency headwinds by q4 can you explain a bit what how you hedge the existing contracts especially for the mining equipment and what you see as the headwind for on the margin from Thank you.

Yeah on mining on the equipment order we hedge the vast majority of orders so we can lock in the margin especially as it's typically some time of course between the point of order and and delivery then that is of course it gives margin predictability for us but it's it's I mean over time we need to work with mitigating currency headwinds of course in in other ways to make sure looking at our cost base price etc but the majority of orders are locked in the currency hedge so we have predictability of of the margin on the orders that we already taken.

Thank you my last question is on the powders can you tell us a bit about the contribution to smm and again how can the market change going forward are you by far the largest provider for tungsten powder going forward maybe a bit more clarity there thank

you I think there are a couple couple of larger providers in the outside of china we are one of them about roughly half of what we produce we use ourselves in the cutting tools and the drill bits and then we sell also externally including to to some of our competitors and of course if there is a shortage and maybe I should also add we our raw material comes from our own mine and then also from recycling so we have buyback programs where we buy back scrap and here is also very limited capacity very few that can do that and recycle the scrap into new powder I think we are one out of two that can do that in a substantial way so if there is a how big is

it yeah so

sorry sorry what did you

yeah how big is it in the context of smm

it's we haven't given a specific figure but it's is between five and ten percent of of smm thank you

very helpful thank you very much thank you

the next question comes from michael harlow from morgan stanley please go ahead

oh hello thank you for the presentation and thank you for taking questions I was wondering if you could give us your views on your competitors from china for the machining business and how we should think about capacity going to europe given what's happening between the US and between china and then on the mining business I was wondering if you could update us on what you see from your customers I don't mean regarding gold and copper but regarding other commodities if you see more hesitation from the customers or slow down given the uncertainty that we are seeing right now thank you

yeah if I start with mining well as you can see at this point with order intake and so on it's it's very good momentum I cannot call out any specific areas where we see where we see hesitation at this point of course again going forward it's difficult to predict but the commodities where there might be some hesitation so they are not related to the latest development is more related to where the commodity prices have been for some time it's been more challenging in nickel iron ore is okay but a little bit more hesitation and so on depending on iron ore prices so no new dynamic as we can see yet but of course mines typically have a little longer planning cycles as well but that's where we are right now Chinese competition in machining in relation to the current you know tariffs between china and us I think it's way too early to to have a view or to speculate at this point most of the local competition which we see in china is I would say towards the lower end of mid-market if we take a european point of view so there might be some opportunities for them but it's not that they are selling much into us as of today so it's not that they need to redirect anything so yeah too early to say if this will have any change in the dynamic but at the moment I don't think it's something that this that is likely at least for the moment

thank you that was very helpful

the next question comes from daniela costa from goldman sax please go ahead hi good

afternoon

thank you for taking my

questions I have three follow-ups as well on things that have been previously discussed but I would ask them one at a time just going back to very clear you're not seeing much on smm at the moment but you've changed the portfolio I guess from from 2020 to now quite a bit and I was wondering if you could comment on your how different do you see the resilience if we end up seeing let's say a 20 drop in volumes just to put an example you dropped by about 40 400 basis points on margins in smm in 2020 this time around given what everything that you've done to the portfolio would you say you're substantially different in terms of your detrimental leverage if we do end up seeing any slowdown

I can start if you want to yes I mean since 2020 we worked really hard with improving our resilience our margin resilience in the within smm both through increasing variable costs working with our fixed costs footprint through the restructuring programs being more agile with price through the inflationary period that we went through and also building or increasing the share of software revenues and I think I think we've had also a couple of quite tough years behind us and demonstrated a very good margin resilience and I mean typically we say that we would aim for a leverage of around 40 percent and that's both of course when we grow and and in a downturn now of course volumes are already at a low level given the developments in the last couple of years but I mean if we look at this quarter and volumes were done we had a very good leverage of 25 percent so so we are of course working very consciously on on this continuously but I think if you compare to where we were in 2020 I think as an organization we've improved a lot I don't know if you want to add anything Stefan

no I agree with that then it's always difficult to predict if we take what you described here as financial crisis scenario and so on but I think we showed during kovid that we could handle a much deep already done a deeper decline the much better way and since then I think we have improved further so I don't think we can quantify it but I think we we are more comfortable now with how we would handle it than in the past

got it thank you very much and then just a clarification or a follow-up on china you were going to or you are going to do some big investments on smm to expand their um capacity locally would the picture change if china saw a significant contraction on on gdp because of the cross currents with the tariffs how how is the investment sensitive to the local climate in or or really not is a longer term decision that you you rather do now

yeah this linked to an investment in an inserts factory for our newly acquired local premium companies also in in china and the new factory went live or was completed in q4 of last year so it's already already there so to say so the current developments would not impact that but I mean long term this an important investment for us to be able to continue to grow and have a competitive position in china and also part of working with regionalization then this year we are slowly then or starting to ramp up volumes in in the factory and that will gradually continue throughout the year

I mean you can take this into angles you could say okay if there is now a big drop in gdp in china because of this the timing is bad but on the other hand if there is a global trade war involving china the timing is great to have local manufacturing capability so i guess depending on what your focus is i think it shows that this was the right thing to do to push forward with having local manufacturing capability in china even if the timing from an economical cycle point of would would prove to be challenging got

it and then just the final one just a clarification on sort of i think the mine the smr organic sales growth was a bit lighter than the market expected maybe can you elaborate a little bit whether on that maybe expectations were just too high or are the conversion between orders and revenues taking longer for any reason or for types of just just wondering the color there

yeah no i i mean for i don't think there is any specific driver at all i think it's normal seasonality if you look historically with the exception of 2023 we always have a gradual increase in volumes throughout the quarters and q4 and then you always send you have a drop into q1 and then it climbs upwards i know there was a little bit extra drama last year when the drop was bigger than also we maybe had anticipated as a normal outcome but this year i would say this is normal seasonality and maybe 2023 distorts the picture a bit if you see that as a normal seasonality the seasonality in 2023 was much lower than we usually have had if you look at 21 22 24 now 25 so there is no let's say driver negative or anything behind it is just seasonality

got it thank you very much

next question comes from magnus krober from nordia please go ahead

hi stephan from nordia a few from yes we're on the follow-up on the leah's question there on the china factor in smm i mean i think it's almost the only business area we saw margin's decline year of year adjusted for effects so how much drag did you have in the quarter from under absorption in in smm china factory

we don't give any any specifics but you can see it um the factory sits in as i said in chosuano which is part of structure so it's part of part of that dilution that you see in in the structure part of the bridge so that's where it sits but we're not giving any more more specifics on other than that

understand thank you and then yes also follow up on james's question on the tariffs and the offsets that you're implementing there do you think that there is actually no possibility that all that we see any sort of change in or different facing with respect to how quickly you can offset it and how quickly the tariffs will come through on the the cost side i'm thinking if we see some something on that in q2 before you sort of claw that back through the rest of the year or is it too small for it to matter

i think first of all a general comment of course it's a highly complex situation with a lot of moving pieces so it is very difficult to give precise answers given timings here and there so but so so that's why i think you should look at the general statement we believe it will be a limited impact and i and i think we can say that goes i mean if we thought it would have a much bigger impact for example in q2 then we will probably have said something around that i don't know if you have anything to add so yeah that's yeah that's it i

appreciate

that

thank you so much cheers

and a reminder if you wish to register for a question please press star followed by one the next question comes on tour fungman from bank of america please go ahead

good afternoon thank you for taking my questions too from my side one is more of a clarification on smm could you say how this has performed sequentially through the quarter as we came out of q4 with organic order growth rate of of around minus three percent and how much of the minus six was basically driven by by march and the later part of march and then just to clarify here the april comment of stable development then refers to the whole q1 or rather to the end of march and then my second question would be on the restructuring program could you just explain a little more where the improvements coming from is more an sgna topic a cox topic and what would you expect is more to come for the next one or two years thank you

okay if i start with the market stuff there and the smm in starting down with the april comment when when we say stable whatever we say but now stable it is in relation to the daily order intake as an average in the quarter you will you so it's the average of q1 and not the last weeks of q1 and that is because you you will always if you look at the months they are always a little bit like a sawtooth months always start a little bit slower and then they go up towards the end so we the normal pattern in april and then also versus the average in q1 on on the progression through the quarter and and the minus three in q4 i want to emphasize that versus q4 this is a stable development in q4 the minus three was helped a lot by high order intake on the powder side but if you look at the comments around cutting tools in q4 it was a different number and it's very similar to the cutting tool numbers now also in q1 then the progressions of the quarter i would say is nothing to call out it's normal how how q1 usually looks like with a stronger march and so on but that's just normal seasonality in q1 restructuring

yes so with the restructuring programs we've had two programs running in parallel the first program we launched in 2022 and the second program we launched in q1 of last year then at the end of last year we had realized most of these programs so the 22 program we had realized around 90 percent of the run rate savings and for the program that we announced last year we had realized about 80 percent of the run rate savings and now at the end of q1 we were at 90 95 percent savings realization so there's not so much in terms of additional savings coming from these programs it's more a full year bridge effect that we are expecting this year

perfect thank you so much both

we have a follow-up question from john keem from dochebank please go ahead you may proceed with your question sir we are not able to hear you

hi sorry about that thanks for the opportunity could we go back to china for a second and could you give us some color on cutting tool demand that you saw on q1 maybe a little bit more detail between the local premium segment and your your core segment before the chinese acquisition called a year and a half ago two years ago

yeah if we talk about the local premium segment if we go back to q1 we commented on that and said that you know the local premium was definitely growing higher than than the average i would say in q1 we did need not quite see that as much but i don't know really how much conclusions to draw from that since it's only one quarter and and we are quite new with having this business as well so in q1 the the average china business and the local premium business had similar performance so as similar as the premium okay helpful yeah thank you

also the next one is a follow-up from james moore from redburn atlantic please go ahead

yes thanks for the follow-up i just wanted to go back to the the manufacturing footprint of smm in the u.s and trying to understand your exposure would it be possible to say how much of the cost of goods sold of smm is localized in the u.s i assume it's quite a low number like 20 or something and i guess you can do two things to handle this one is move more of your cogs into the u.s and secondly put prices up and i'm really just trying to understand how much your mitigation action is former versus the latter like do you think you can get 70 80 percent of us smm cogs into the usa through moving to your existing facilities could you move it that much or is it more on the pricing side that really the maths of the response works

yeah i understand and the this will of course depend on the level of the tariffs and and if tariffs at current levels i think it's easier and actually better to mitigate more towards this with pricing because otherwise the cost in the u.s is is is higher than the tariffs pretty much but the higher the tariffs the more of course we will rebalance production and this first step is rebalance with existing capacity as i said meaning then produce less for europe in the u.s and focus the u.s manufacturing we have on the u.s market the second step will be to increase capacity in in those facilities and and i cannot say exactly how much we will do or what currently because we don't know where the let's say mid to long term tariffs will be we know what we're doing here and with the current situation but we also know there's ongoing negotiations and this is a so-called pause so what will happen beyond that but that we are planning for all of these scenarios preparing and then exactly how it will end up depends on the level of the tariffs but we can increase capacity of course in the u.s we have existing facilities even if we have set up we have to set up for example a new production line that is something we i mean we move things around in restructuring programs all the time so it will be of course a little bit of a lag to do that but the time frame is still you know very much manageable in relation to sort of the the time scales we are talking about here we are talking about quarters in on in terms of timing and then depends on you know what products some take some are faster some are longer but very difficult to give a straight answer given that we don't know yet exactly what we're going to optimize towards but we we have the plans we know what to do depending on the outcomes

that's a really helpful map stephen thanks

we have another follow-up question from michael harlock from morgan stendley please go ahead

thank you for taking my question if i may just ask a follow-up on on on the topic of tariffs how should we think about your setup versus kenna metals in in in the u.s and what happens if we see well if you would have an advantage or a disadvantage in case of a price increase that makes sense to you

thank you yeah first of all let me say i don't think there's going to be any winners if there is a global trade war and we talked about china before we are now the only western manufacturer with local manufacturing capability for inserts in china so there's going to be puts and takes here for sure which also means opportunities some regions we are of course i mean if you look at the u.s most of competition are in a situation actually where they are importing basically everything we are one of the few with local manufacturing capabilities if we have to we will simply increase production capacity in the u.s it's not a it's not a big thing for us so if the competitive dynamics forces us to increase capacity in the u.s we will do that um that's uh that's our plan thank you very helpful

the next question is a follow-up from magnus krober from nordia please go ahead

hi i'm here again yes thank you it's very difficult to assess obviously what what invest what what what what your customers are doing more than what we've already said but how do you how are you thinking with respect to your own investment decisions in different businesses are you holding on to investments now in anticipation of what we will see over the power of next 90 days so how are you thinking

in terms of capex investments that we have part of the five billion guidance for the year the vast majority of that is maintenance capex and also investment into new erp systems etc so you can see in the first quarter now we had one billion sec um so i think the current dynamics will not have a material impact of the type of projects or investment that we have as part of our capex pipeline

then then we should have that capex is also part of our contingency plans so if we end up in a situation where we go into a more serious contingency because of market developments we we can of course tighten the screws but i don't think that's where we are right now but thank you so much

all right i think it's time to to end now and but before we do also i would like to remind you that samvik has our capital markets day 20 21st of may and if you wish to attend but haven't registered please contact investor relations and we will help you with that and with this we say thank you for calling in and have a good day