Sandvik AB (publ)

A warm welcome to Sandvik's presentation of the fourth quarter results 2025. My name is Louise Cheddar, Head of Investor Relations and beside me I have our CEO Stefan Widing and CFO Cecilia Felton. We will start off with the presentation. Stefan and Cecilia will take you through the highlights of the quarter and the remaining time we will spend on the Q&A session. So let's start. The word is yours.

Thank you. And also from my side, of course, a warm welcome to the fourth quarter report in 2025. If we summarize the quarter, we see a strong ending to the year with double digit order intake and revenue growth. We see a strong demand in mining and infrastructure is continuing to improve. There's a mixed demand in cutting tools with strong demand in, for example, aerospace and defense, while automotive remains weak. We also see a strong demand in both software solutions and powder solutions. Total order intake grew by 4% and the organic order intake growth was 15%. Revenue increased totally by 1% and organically by 12%. We also see a stable margin on the significant currency headwinds. Adjusted EBITDA came in at just below 6.4 billion, corresponding to a margin of 19.6%, which is a slight improvement versus last year, even though the figures round to the same number. On the rolling 12-month basis, the margin is 19.3, up from 19.2 in the year before. The savings in the restructuring programs had a positive bridge effect of 131 million in the quarter, and the adjusted profit for the period came in at 4.2 billion, up from 4.1. We also had a strong free operating cash flow of 6.7 billion, corresponding to a cash conversion in the quarter of 110%. A couple of strategic highlights, as always. We continue to see strong momentum for digital solutions in mining. In the quarter, we booked two large automation orders, which were significant. We also see strong growth in our software offering in mine planning. And overall, digital mining technologies booked good double-digit order intake in the quarter. And for the full year, the business also grew in the double digits. In intelligent manufacturing, our Metrologic business unit launched a new version of their software, where we now include our co-pilot AI technology also in this software. They also launched a new machining module. which is important for us because it means that the metrology software will, based on the measurement, recommend machining process updates to ensure that the component is more aligned with the intended design. So we start to connect the loop between metrology and machining. Rock Processing launched a new jaw crusher platform with significant new automation features, also significant productivity gains and longer service life. And this platform also received Sandvik's internal innovation prize award in 2025 because of the significant improvements in the product. If we look at the market development and we start with the geographical perspective, Europe was up 13% and here cutting tools was up in the mid single digits. North America up 9% with cutting tools up in the high single digits. Asia up 14% and China cutting tools up in the double digits. And then mining markets, Africa, Middle East up 5%, Australia up 43%, and South America up 13%. So solid growth across all geographies. If we then go to mining, as I said, we continue to see strong demand basically across the board. General engineering here, underlying, it's stable, but we do see low double-digit growth, driven then by good double-digit growth in China. Europe up low single digits and North America up mid-single digits. In infrastructure, we see continued improvement in particularly driven by North America. But overall on a global scale we still characterize it as a fairly stable development. We also see some signs of improvement in Europe. Automotive is a bit weaker, overall up in the low single digits. Europe is flat, North America up mid-single, and China is down high single digit. Aerospace strong, up in the double digits, and both Europe and North America is up in the double digits, while China was down in the double digits, primarily driven by timing of orders. In the other segments, we are up by single digits. Europe is up by single, driven then in particular by defense. North America is up mid-single, while China is flattish. Summarizing then the order intake and revenues, we book orders in the quarter of $32.7 billion, revenues $32.5 billion. And this is a positive book to bill of 101%, which is fairly unusual in the fourth quarter where we typically have strong deliveries of equipment. But thanks to the strong order intake, we still maintain a positive book to bill also this quarter. Looking at this from another angle, we can see the order intake continues to be strong in the solid double-digit space. We also see revenues picking up, also now in the double digits. And this is, of course, a consequence of that we are also now delivering and invoicing mining equipment at a higher level than before, showing that we have managed to ramp up production to meet demand in a good way. Adjusted EBITDA improved by 1.4% in absolute terms, 6.4 billion almost, up from almost 6.3 last year. This corresponds to a margin of 19.6%. And here we see solid leverage on the higher volumes. We also have good price execution and good savings, but then offset by the strong currency headwinds. The currency impact came in at almost 1.2 billion negative, a dilution of 130 basis points. And as you know, this is a more adverse headwind than we had guided for when the quarter started. Of course, driven by a continued weakness of the US dollar and a continued strengthening of the Swedish SEC. Rolling 12 months, then a margin of 19.3%. Going first into the mining business, we continue to see a strong momentum with strong demand both for our underground and our surface solutions. We see a double-digit organic growth across all our equipment divisions as well as parts and services and digital mining technologies. Total order intake increased by 5%, the organic growth was 17%, and the growth of equipment was up 39%. Excluding major orders, we were growing organically by 12%. The adjusted EBITDA came in at just below 3.8 billion, corresponding to a margin of 21.5%. We have good leverage on the higher volumes, but it is offset by the very negative currency. The operating leverage was 32%, which we are satisfied with in this business. The currency then was negative by over 700 million year on year, corresponding to a dilution of 120 basis points. Rock processing, here we saw order intake in the mining part of the business declining year on year on tough mining comps. The underlying market demand was robust. We saw solid demand in infrastructure, driven in particular by U.S. demolition and recycling, as well as for the first time in a long time, I would say, an improvement in aggregates. And we also see positive signs in Europe. Total order intake declined by 9%, but organically it was a black zero. And excluding major orders, it was an organic growth of 2%. Adjusted EBITDA came in at just below 400 million. This corresponds to a margin of 14.5, slightly down from 14.6. But a strong operating leverage of 41%, with good savings, was offset then by a very negative currency impact. almost 100 million negative impact corresponding to a dilution on the margin of 170 basis points. And then machining and intelligent manufacturing. Of course, the last quarter, we will present this in this form. Going forward, you will see these two businesses being reported separately. We see a mixed demand for cutting tools between the regions and segments. Strong demand in aerospace and defense, as I've said, while demand in general engineering improved, but it was primarily then driven by a strong development in Asia and China. while automotive remained weak across more or less all the regions. Orders in cutting tools overall increased in the high single digits. It's partly due to low comps. Remember, for example, that Boeing was on strike in the fourth quarter of 24, but also positive contribution from price and tariff surcharges. We see a double-digit growth in intelligent manufacturing and also in powder solutions. And total order intake increased by 5%, and the organic increase was 15%. If we look at the start of January, we continue to see a stable development compared to the fourth quarter, if we look at the daily order intake and take normal seasonality into account. The adjusted EBITDA came in at 2.4 billion, corresponding to a margin of 19.7%, which is up from 19.4 in the prior period. We see good price execution, very good savings, and also structure-supporting margins, then partly offset by a negative currency. The savings had a positive effect in the quarter of 103 million. Acquisitions had an accretive effect of 20 basis points, while currency then had a negative impact of 330 million, corresponding to an 80 basis point dilution. With that, I'll hand over to you, Cecilia, to take us through the details.

Thank you, Stefan. Hi, everyone. All right. So as usual, then, let's start with the growth table on the right-hand side here. As Stefan mentioned, we had very strong organic growth. Orders grew by 15% and revenues by 12%. Structure was neutral on both orders and revenue, while currency had a significant negative impact, minus 12% on orders and minus 11% on revenues. All in all, though, a total order growth of 4% and a revenue growth of 1%. Adjusted EBITDA increased year over year to 6.4 billion, corresponding to a resilient margin of 19.6%. Net financial items continued to trend downwards year over year. I will show you a few more details around that in a few minutes. The tax rate excluding items affecting comparability and also on a normalized basis was 24.4%, so within our guided range. Networking capital also continued to gradually trend downwards. We ended the year on a 12-month rolling basis at 28.7%, so an improvement of 1.2 percentage points compared to last year. As Stefan mentioned, strong cash flow in the quarter, 6.7 billion, corresponding to a cash conversion of 110%. Returns improved year-over-year, and adjusted EPS grew to 3.38 SEC. If we then continue with the bridge, and as usual, starting with the organic column, you can see that revenues grew by 3.9 billion, and that generated an EBITDA of 1.2 billion, so a solid leverage of 31%, which was accretive to the margin by 1.3 percentage points. Significant currency headwind, both in absolute numbers, as you can see here, and a delusion to the margin of 1.3 percentage points. And structure was slightly accretive. But all in all, resilient margin and good development considering the currency headwind. If we then continue down the P&L, looking at the finance net, it came down year over year, and this is mainly driven by the lower interest net. You can see it on the first row here, and that's a result of both lower yield cost, but also lower borrowed volumes. Reported tax rate came in at 24.5%. Items affecting comparability had a small impact in the quarter. So excluding items affecting comparability and also on a normalized basis, the tax rate was 24.4%. So within the guided range. As I said, working capital continued to trend downwards, an improvement of 1.2 percentage points on a 12-month rolling basis. So a good achievement this year, but also a continued focus area for us across the group. And on the right, you can see that the networking capital improvement was driven by mining and rock processing. In the bars, you can see that it was a strong cash flow quarter, as we said, 110% cash conversion. In the trend line, you can also see that for the full year, we had a cash conversion of 95%. If we then look at the year-over-year development, earnings adjusted for non-cash was higher. CapEx was a little bit lower, and the positive impact from networking capital was also a little bit lower compared to last year. But all in all, then, an increase in free operating cash flow to $6.7 billion. The positive cash flow also resulted in a reduction in financial net debt, which came in at 27 billion. And in relation to 12 months rolling EBITDA, we're now at 0.9. Capitalized leases and the pension liability came down a little bit sequentially, which resulted then in a net debt of 34 billion. Looking at outcome versus guidance, currency, as Stefan mentioned, came in at 1.2 billion, a bit higher than our guidance of 1 billion. That was based on the rates at the end of September. CapEx for the full year a bit lower than guidance. This is partly driven by currency, but also timing of some projects and initiatives. The interest net and the normalized tax rate came in in line with the guidance. And looking ahead then at the first quarter and the full year, if we start with currency, here we expect the significant currency headwind to continue into the first quarter, both on top line and also on EBITDA. And as you know, from a seasonality point of view, Q1 is also typically a low invoicing quarter. Nevertheless, unexpected negative currency impact of minus 1.4 billion, and this is now based on the currency rates as of the 23rd of January. Then if we look at full year, we estimate CapEx to come in at between 4 and 4.5 billion. We expect the interest net to continue to trend downwards with a guidance of 0.6 billion. And for the tax rate, we have left the guidance unchanged. And with that, I will hand back over to you, Stefan.