Sandvik AB (publ)

A warm welcome to Sandvik's presentation of the second quarter results 2025. My name is Louise Cheddar, Head of Investor Relations. And of course, beside me, I have our CEO Stefan Widing and CFO Cecilia Felton. We will, as we usually do, start with the presentation, present the quarterly highlights, and after that, we will move on to the Q&A session. And with this short introduction, I will hand over to you, Stefan.

Thank you, Louise. And also from me, welcome to the second quarter report of 2025. If we summarize the quarter, of course, we have to start with the order intake, which is at an all time high level. We see a strong momentum in mining and also in powder solutions. We see a positive development in the software business, aerospace and some of the smaller segments. I'll come back to that. While, of course, demand in general engineering, automotive and infrastructure continues to be soft. Order intake was stable year on year, but organically it grew by 10%. Total revenue decreased by 5%, but organically it grew by 3%. We consider this to be a solid quarter from a profitability point of view, with an adjusted EBITDA of 5.6 billion, corresponding to a margin of 19% versus 19.6% last year, and a rolling 12 of 19.4, which is the same as we had a year ago. And considering the significant currency headwinds and the fact that we have fully mitigated the tariffs in the quarter, we consider this to be a solid result. We also have savings from our restructuring programs with a positive bridge effect of over 200 million in the quarter. Adjusted profit for the period was 3.7 billion versus 3.9 last year. And we had a strong cash flow of 5.1 billion versus 4.2 in the same period last year. We also continue to make progress in our strategic priority areas. We see strong revenue growth in the software business, in surface mining and in parts and services. We have booked, as you know, our largest battery electric vehicle order ever in the quarter. And we have also continued to make acquisitions that is expanding our reach in faster growing segments. The innovation of the quarter that I want to highlight is VeriCut Optimizer. This is a product that won Sandvik Sustainability Award in 2025. It's a collaboration between VeriCut, which is a business unit in intelligent manufacturing, and Seco Tools, which is a division within machining. And it's a joint solution that increases our customer relevance and stickiness. It's a product that increases or optimizes the numerical control or NC program, which is the program you run on the CNC machines to run the machining process. And it will help you to optimize the process in terms of efficiency and productivity. If you were at our Capital Markets Day, you saw this product being demonstrated live also during the factory tour. If we go through the market regions and segments, starting with the geographical perspective, Europe was down 4%, and here cutting tools was down low single digits. North America was up 32%, driven by a strong mining. Cutting tools was stable. Asia down 5%. Cutting tools in China was down mid-single digits in China. However, here I want to note that if we would include the Shoshuano acquisition, which is still reported in structure, and also compensate for the workday effect in China, we were actually stable in China in the quarter. So it shows probably a better picture of the underlying market, as well as showing that our local premium segment that we now have exposure to through Shoshu Anno is growing at a higher pace than our traditional exposure that we've had in China. And then we have the remaining regions, which is primarily driven by mining, all being positive. If we take a market segment perspective and start with mining, of course, as you have seen, a very strong momentum pretty much across the board. But I want to highlight specifically the strength in North America, Australia and South America in the period. General engineering continues to be weak. It's down mid-single digits. Europe is down mid-single, while North America and China are down low single digits. Infrastructure is also, let's say, fairly subdued. The uptick we saw in North America at the beginning of the year has turned into a more flattish development. It's a mixed picture however where demolition tools and attachment tools have a stronger development while aggregates is still having a weaker demand picture. Automotive, weak, down high single digits. Both Europe and North America down high single digits. In Asia, we are also down. In China, we are down low double digits. But also here, if we would include Shoshuano, we would be down mid single digits. So they clearly have a stronger presence in the Chinese automotive supply chain. Aerospace, good momentum, definitely reported only up low single digits. Europe is down low single digits, but the underlying demand is strong. It's a timing issue. So that's why we still show it as positive here in this picture. North America up double digits and here we clearly see the impact of the main customer in North America coming back and ordering products again, which is very positive. Aerospace in China was down high single digits. Then the other segments are stable. Here, I want to highlight positive development in some of the segments, such as defense, rail, shipbuilding, and consumer electronics, while more, let's say, traditional industrial segments, such as machine tools and pumps, were negative. But overall, stable development here. Europe stable, North America up, high single digits. China down mid-single, but if we include Susano, stable as well. Going down into order intake and revenues, and here we have reported numbers, and despite the high organic order intake in the quarter, you see a flattish development because it's offset by currency in the reported numbers. But of course, a very healthy book to build of 108%. And our order backlog is actually now also at an all time high level, which of course is positive as we go forward. If we look at this from an organic perspective and structure, but at fixed exchange rates, you can clearly see the momentum in the order intake. It's actually the fifth quarter in a row now with positive organic order intake, but first time in a while that we have a double digit number there. Revenues up 3%, as I said, also here a quite clear trend since Q1 of 24, where it has gradually been improving and now turned clearly positive at the 3%. So good to see. Profitability, margin of 19%, 5.6 billion, down 8.5% versus last year. We consider this to be a resilient margin given that there are key segments that still have low volumes and we have significant currency headwinds. Currency is diluting by 40 basis points. In the bridge, there are some additional currency impacts that we'll come back to in the organic part of the bridge as well. And as I said, on the rolling 12, we are flat versus a year ago at 19.4%. Going into the segments, starting with mining, very solid momentum. We really see a broad-based demand across the board, with also record high order intake for the business area. The strong order intake growth is driven by equipment divisions, which is up 50%, but also high single digits growth in parts and services. Also, the service business continues with very good progress. So total order intake increased by 5% and organically at 18%. If we strip out the large orders, we still increased by 14%. So of course, 2.1 billion in large orders is a lot this quarter, but we also had a very strong quarter last year. So it was fairly tough comps. But what this shows is also that it's not only the big orders, also the small orders and mid-sized orders are coming in strongly right now. Margin of 20.3 versus 20.8. On the low side, we believe, definitely because of a low leverage, driven by some currency effects in the organic bridge as well, is re-evaluation of unhedged balance sheet items. You might have questions around that. Let's come back to that in the Q&A in that case. We can spend some more time on it. And then also an European go-live that has caused underabsorption in the quarter because of inability to deliver fully in one of the divisions. Tariffs fully offset in the quarter through, for example, pricing actions. Some savings in the quarter, 37 million. Exchange rates actually accretive to the margin by 30 basis points because the impact on the top line is larger than the impact on the bottom line. If we add all of these things together, a little bit of maybe a strange picture, we'll come back to the bridge if you have further questions on mining margin. Positive, of course, we are now also ramping up to meet the high demand from a production point of view. In the quarter, we opened up a new production line for surface drill rigs in Finland. And we have also launched a new auto mine surface fleet solution to further support our strategic focus to grow in surface mining. And we already talked about the BEV order that we announced in April. Rock processing also see a solid momentum in mining, but infrastructure continues to be at a lower level. Total order intake decreased by 3%, but organically it grew by 8%. And they also received two major orders in the quarter, totaling 145 million. Margin of 14.6%, down versus last year where they were at 15.1%. Here they had good contribution from their savings, but a very negative impact from exchange rates. So savings of 15 million, but 100 basis points dilution from exchange rates. Also here tariffs was fully offset in the quarter. We have launched an important innovation with a fully upgraded jaw crusher range in the quarter and of course also completed the acquisition of OSA demolition which is strengthening our demolition and recycling offer. And then machining and intelligent manufacturing. Demand for cutting tools declined year on year at low single digits. We saw strong development in powder with double digit growth. Software orders increased low single digits. We had very tough compares with solid double digit growth last year on the order side. But software revenues continued to grow at high single digits. Aerospace, as I mentioned, developed positively and then primarily driven by North America. Total order intake decreased by 7%. Organically, it declined barely by 1%. And then we continue to see a stable development into June in the first two weeks. We can also say here, if you look at the quarter two, we did see a stable development on the daily order intake throughout the quarter compared to Q1. If you do the math, it's slightly up by 1%, but from our point of view, the market has shown a stable development and continues to do so. And I think considering what we could fear in the beginning of April, I think this is still a solid development for the business in the quarter. Margin of 19.6%, good price execution and strong savings of 153 million, but offset then by volume declines and the currency impact that diluted the margin by 60 basis points. They also had structure diluting by 30 basis points. Tariffs also here fully offset in the quarter with tariff surcharges. Also here, we have launched several important innovations. I mentioned one already in the quarter, and of course completed the acquisition of Verisurf in intelligent manufacturing. And with that, I hand over to you, Cecilia.

Thank you, Stefan. All right, so let's dive into the numbers then in a bit more detail. And as usual, let's start with the growth bridge on the right-hand side here, where you can see that, as Stefan said, we had strong organic order intake growth of 10% and revenues grew organically by 3%. Structure contributed positively with 1%, but you can also see the strong currency headwinds, minus 11% on order intake and minus 10% on revenues. Adjusted EBITDA, 5.6 billion, corresponding to a margin of 19%. Net financial items came down year over year, and I will go through this in a bit more detail in a few minutes. tax rate excluding items affecting comparability and also on a normalized basis at 23.5 percent so in line with the guided range networking capital came down slightly compared to last year. This is calculated on a 12-month rolling basis to 29.6%. We also had a good cash flow in the quarter, 5.1 billion corresponding to a cash conversion of 94%. Rows improved year over year while EPS came down driven by currency. If we then continue with the EBITDA bridge, starting with the organic column, you can see that we had a low leverage of 15%. And here we had good leverages both in machining and intelligent manufacturing and also in rock processing. But in mining, leverage was 12% impacted by the two items that Stefan mentioned earlier. Currency then had a negative impact on top line of 3.1 billion minus 702 million on EBITDA and that gave a dilution of 0.4 percentage points. Structure was slightly dilutive and then all in all that brings us from a margin of 19.6% last year to 19% this year. If we then continue down the P&L, looking at the finance net, you can see that it came down year over year, and this is mainly driven by the lower interest net. And that's a result of a combination of both lower borrowed volumes, but also lower yield cost, which you can see here at the bottom of the table. Tax rate then on a reported basis, 23.6%. And you can see that items affecting comparability only had a small impact on the effective tax rate in the quarter. And the normalized tax rate was then in line within the guided range. Networking capital, if we start looking at the graph on the left here, you can see that it's flattened out and now slowly, gradually starting to trend downwards. And on the right, you can see that networking capital levels have come down for both mining and the rock processing business areas. As I said, free operating cash flow was good in the quarter, 5.1 billion. And if you look at the table first, you can see that EBITDA adjusted for non-cash was largely in line with last year's levels. CapEx was a little bit lower, and we also had a smaller networking capital build-up this year compared to last year. And if you look at the trend line on the left, you can see that on a 12-month rolling basis, we are now at a cash conversion of 98%. Financial net debt increased sequentially to 37 billion driven by the dividend payments that we had in the second quarter. And this also caused a seasonal uptick in financial net debt over EBITDA to 1.3. Capitalized leases increased slightly sequentially, the pension liability came down somewhat, which then resulted in a net debt of 45 billion. Looking then at outcome versus guidance, as I said, the currency impact was minus 702 million in the second quarter. And then if we look on a year-to-date basis, CapEx is now at 2 billion, interest net at 0.5 billion and normalized tax rate at 23.7%. And looking ahead then at the third quarter and full year, here we expect a negative currency effect of 800 million in the third quarter. And this is based on the currency rates on the last of June. For the full year guidance, we have revised the capex downwards from the previously five billion to four and a half. And this is partly driven by currency, but also lower anticipated spend in machining. Then for the interest net and the tax rate, we have left guidance unchanged. And with that, I will hand back over to you, Stefan.