A warm welcome to Sandvik's presentation of the third quarter results 2026. My name is Louise Tjeder, and Head of Investor Relations, and beside me, I have our CEO, Stefan Widing, and CFO, Cecilia Felton.

We will, as we usually do, start with the presentation. Stefan and Cecilia will take you through the highlights of this quarter, and after that, we will move on to the Q&A session.

With this short introduction, it's over to you, Stefan.

Thank you, Louise, and also from my side, hello, everyone, and welcome to the third quarter report. If we summarize the quarter, we think this was a very good quarter.

We see broad-based demand, we have strong operational execution, the profit margin is above our target range, and we also have a record-high cash flow in the quarter. Total order intake grew by 20%, and the organic order intake growth was 17%.

Total revenue growth was 29%, and the organic revenue growth was 25%. Adjusted EBITA came in around 8.5 billion SEK, and this corresponds to a margin of 22.5%, up from 19% in the prior year period.

The rolling 12-month EBITA margin is now at 21.3%. Adjusted profit for the period amounted to 5.8 billion, and the free operating cash flow then came in at 7.2 billion, up from 5.6 and corresponding to a cash conversion of 87% in the quarter.

If we focus a bit on some of the key strategic highlights in the quarter, starting with Rock Processing, a good product launch in the screening business under compact screen size. We usually have engineered products in screening, but these are standard products that are pre-engineered, and this means that we can deliver faster and also reduces the amount of time we have to spend on each order.

A good product launch from them. On the mining side, we had our Future of Mining event with over 600 customers in the quarter, and there we launched our concept surface drill rig, which showcases the future of surface mining.

This is a fully automated and battery-electric machine combining AI, robotics, electrification, and digital connectivity, and it shows our vision for how we think surface mining will develop in the future. Those of you that will attend our Capital Markets Day in Finland in November, you will get to see this machine performing live in our surface test mine outside of Tampere.

Intelligent Manufacturing had a milestone also this quarter. We participated, both Intelligent Manufacturing and Machining, at the IMTS trade show in Chicago.

This is one of the largest manufacturing trade shows in the world that happens every second year. Here, for the first time, we showcased our digital solutions under the Sandvik brand umbrella for the first time, and we also launched a new solution called Manufacturing Lifecycle Management, where we connect the dots between design, machining, and quality data across the entire lifecycle for the first time.

Also this, we will showcase more to those of you that will attend the Capital Markets Day in November. Also to show that we also, of course, innovate in our core product range, Walter released a new portfolio of solid carbide end mills in the quarter.

These are products that are tailored for the aerospace sector, and especially hard materials such as titanium and special grade stainless steel. Important innovation in the core business as well.

If we shift to focus on the market development, we continue to see a robust development both upstream and also downstreams. High commodity prices continue to underpin a strong activity, and we see a good demand both for equipment and aftermarket.

High utilization rates and an aging fleet, of course, drives consumption demand for parts and services also this quarter. We continue to see a good interest and demand for our digital and automation solutions, and we also see now a bit of an increased activity in downstream mining, even though we do not see it in the order book yet, but we do see an increased activity, which is positive.

Infrastructure market also continues to develop positively. We should highlight demolition and recycling, and also North America, which is where we see the most positive market sentiment, but also slightly positive in aggregates and in Europe.

If we look at the industrial segments, starting with General Industry, we see quite broad-based demand picture here, up across all regions. Aerospace and defense is very strong, also across all regions.

Light vehicles continues to be subdued. We can say that Europe and North America are stable at low levels, while China deteriorated in the quarter.

India is really the only larger market where we see a positive development in the quarter. Then for the other segments, mining, energy, and transportation, medical and electronics, we overall see a positive development, with some specific highlights around power generation and some of the transportation segments.

If we look at our organic order intake for cutting tools in the period, that of course broadly, or in most cases, align well with the underlying market I showed, a few deviations. If you look at General Industry, you can see negative China.

Here, we see a positive development in the premium cutting tools, but we have a business around blanks, and this is a product that sits between the powder and the finished cutting tool, selling sort of half-finished products on the Chinese market. Here, we saw significant pre-buys or stocking up earlier in the year driven by tungsten price dynamics, and now with stable tungsten prices, customers are simply using the inventory they bought earlier, so that has a negative impact in the quarter for that business.

Otherwise, light vehicles, also you can see then negative in China. Europe is up high single digits, but there's of course a lot of price in there, the volumes are actually down.

North America also slightly down on volumes. Otherwise, I think there are no specific things to call out in this picture.

If we go to orders and revenues, orders close to 37 billion in the quarter, revenues 37.7, book-to-bill of 98%. As you recall, we typically have a second half of the year with higher deliveries and usually a slightly negative book-to-bill below 100%, this is nothing unusual for the season.

If we look at this from another angle, organic and structural growth, I think key thing to highlight here, it's the sixth quarter in a row with double-digit order intake growth and solid organic growth across this period. This was also a quarter where we started to meet a bit higher comps.

We grew 16% in the same period last year, and now 17% this year, I think strong order growth on top of a strong quarter last year. Revenues, of course, we continue to ramp up, and very solid execution there with a 25% revenue growth in the quarter.

Going into our business areas then, starting with Mining, again, very solid demand across both equipment and aftermarket. We have good organic order intake growth driven by strong growth across all our aftermarket divisions, summing up to 16%.

Equipment, 23% growth if we exclude major orders. As you recall, we grew equipment by 75% last year driven by large orders.

I think the large orders this quarter are okay at 700 million, but very tough on the comp side. I don't see this as anything that is concerning in any way.

Profitability was strong at 4.3 billion, profit margin of 21.8%, good organic leverage of 31%, and then a little bit of a mixed impact from currency, where it had an absolute positive impact, but since the top line was even more positive, it had a slightly dilutive effect on the margin in the quarter. You can also see the split: brownfield 55%, greenfield 13%, and replacements 32%.

This is fairly in line with what it has been in the past couple of years, maybe slightly stronger brownfield at the expense of greenfield, a couple of percentage points, if you look at the average of the past couple of years. Rock Processing then, robust underlying demand in mining, and also, as mentioned, a positive market sentiment in demolition and recycling.

Total order intake, though, decreased by 2%, and the organic drop was 8%. Here, we had no major orders this quarter, while we had a couple of large orders last year, this was more flattish if we exclude for that.

We also see a very strong demand in aftermarket, which is positive, shows the activity levels in the business, but orders on the equipment side in this a little bit smaller business area are lumpier, and that we also see in this quarter. Adjusted EBITA 418 million, a solid margin then of 15%, basically the same as last year, down 10 basis points.

We have a negative operating leverage in the quarter. Since the revenue growth organically was flat, it's very small numbers we're talking about here.

We are investing in the front line as we see a positive demand picture going forward, and which means we have a little bit of higher costs there in the quarter that is not yet met with higher revenues. Again, overall small numbers in that bullet point.

Currency also small impact, accretion of 10 basis points. Machining then, positive demand, as mentioned, across the board except for light vehicles.

Total order intake growth by 35% organically, or at fixed exchange rate 33%, and also organically 33%. Cutting tools grew by 19%.

In that number, we would say underlying volume improvement around 5%, on top of that, a couple of more percentage points driven by pre-buys, and then the remaining part is essentially price. We continue to see development continuing in the same way now into the fourth quarter.

EBITA was high, 3.7 billion, margin of 25.7%, up from 19%. Here, we then have positive contribution from the higher volumes, from the powder business, and also from our savings programs, which are contributing 82 million in the quarter.

The temporary timing effect coming from tungsten came in at 104 million, which is about 100 million lower than our guidance, and this corresponds then to an in-quarter effect of 70 basis points. The leverage was very good in the quarter, 45%, and currency had a slight positive impact of 10 basis points.

Intelligent Manufacturing had a very solid and I would say uneventful quarter, broad demand across the board, strongest coming from aerospace and defense. We have a double-digit order intake growth in both licenses and subscriptions.

If we normalize for the -2% that comes from the transition towards subscriptions, the order intake growth was 14% underlying in the quarter. Profits were also good, 258 million, leverage of 33%, and a margin of 27.1%, which is very strong.

Neutral from currency, in absolute terms, slight dilution on the margin, and then also a very positive effect from our acquisitions year-over-year. With that, I hand over to you, Cecilia.

Thank you, Stefan. All right, let's dive into the numbers then in a bit more detail together.

As Stefan said, strong growth on both orders and revenues, which resulted in order intake just short of 37 billion and revenues of 37.7 billions. Earnings came in at 8.5 billion, corresponding then to a margin of 22.5%.

This is the second consecutive quarter where we are above our margin corridor. Net financial items came down compared to last year, as you can see here.

Tax rate excluding items affecting comparability and also on a normalized basis was 24.3%, in line with guidance. Net working capital continues to gradually come down.

We're now at 27.2%, and this is on a 12-month rolling basis. You can see that it is an improvement of 2.1 percentage points compared to last year.

As Stefan mentioned, it was a strong cash flow quarter, 7.2 billion, corresponding to a cash conversion of 87% in the quarter. Returns also improving year-over-year, reaching 19.1%, and if we exclude PPA, we are at 20.4%.

Adjusted EPS grew by 65% compared to last year and reached 4.64 SEK. Good earnings growth and also margin improvement compared to last year, and this is primarily driven by higher volumes, good profitability in powder solutions, and also our ongoing savings program.

As Stefan mentioned, the temporary timing effect from the tungsten price development came in a bit lower than what we guided, at 104 million. This is due to, as you might have seen, tungsten prices came down slightly towards the end of the quarter, which resulted in a revaluation of our inventory and hence the slightly lower outcome.

However, at a group level, this corresponds to an in-quarter impact of 30 basis points. All in all, a good leverage of 37%.

Currency was slightly dilutive, 20 basis points, and as you can see here in the graph, on a 12-month rolling basis, the margin is now at 21.3%. If we continue with the bridge then, and as usual, we'll start with the organic column, the good leverage of 37% resulted in a margin accretion of 3.6 percentage points.

Currency was positive, as you can see here, both on top line and on EBITA, but the top line impact was bigger and hence there's a slight margin dilution of 20 basis points. Structure was slightly accretive, and all in all, that brings us from a margin of 19% last year to 22.5% this year.

If we continue down in the P&L looking at net financials, and as usual, starting with the interest net, here you can see that it came down, but very slightly compared to a year ago. This is a net impact of, on the one hand, lower borrowed volumes, but as you can see here at the bottom of the table, we also have a higher borrowing yield.

Then last year, we had a negative impact and in FX and other asset classes, whereas this was slightly positive this year, and these are the main explanations for the reduction in the finance net. Tax rate, as you can see here, very uneventful in the quarter, 24.3% on a normalized basis, which is in line with our guided range.

Here you can see that net working capital in relative terms continues to trend down. As I said, we're now at 27.2%.

On the right-hand side, you can see that this is primarily driven by Mining and Rock Processing. Good development and achievement so far, but also a continued focus area for us going forward.

If we then continue with free operating cash flow, and as you can see in the bars here, it was a strong cash flow quarter, 7.2 billion, corresponding to a cash conversion of 87%. You can also see that on a 12-month rolling basis, cash conversion is now at 75%.

Looking at the year-over-year development, you can see that EBITDA adjusted for non-cash was significantly higher compared to Q3 of last year. CapEx was a bit higher, and then you can see the impact of the net working capital buildup, all in all then ending up with a free operating cash flow of 7.2 billion.

Financial net debt remained at 30 30 billion. It's the same level as we had in the second quarter.

Net debt also remained at 37 billion. Our balance sheet target, however, came down slightly.

We were at 1 at end of Q2, we're now at 0.9, and this is driven by a higher 12-month rolling EBITDA. Looking then at outcome versus guidance, currency came in at 158 million.

The temporary timing effect from tungsten price, as I mentioned, 104. Then on a year-to-date basis, CapEx is now at 2.8 billion, interest net at 0.5, and the normalized tax rate at 24.2%.

Looking ahead then at the fourth quarter and full year, we expect a continued positive currency impact of around 0.6 billion in the fourth quarter. In terms of the temporary timing effect from the tungsten price development, here we expect a limited impact in the fourth quarter, and this is based on the tungsten prices as of last of September.

We will also have a tariff refund in Machining in the fourth quarter, and this would be of around 400 billion, which will then negatively impact both order intake and revenues for Machining. As we have received these tariff refunds, we have booked them as a liability on our balance sheet, and this means that there will be no impact on absolute EBITA.

Then for the full year, we have left guidance for CapEx and tax rate unchanged, but we have increased guidance for interest net slightly to 0.7 billion. With that, I will hand back over to you, Stefan.

Yes, thank you. I just want to clarify when we talk about the tariff refund that we have already received that refund, and now we're talking about that we will give this back to our customers.

Just so there's no misunderstanding there. Good.

On the conclusions, if we start on the macro side, we, as said already, continue to see a strong demand in upstream mining and also an increased activity downstreams. We see a positive demand picture in cutting tools, and the supply constraints and high market activity continues to support a strong tungsten demand as well.

We have a strong financial performance, order intake growing double digits, and the strong execution led to 26% revenue growth in total. Our profit margin is above our target range, and we deliver a record cash flow.

As Cecilia mentioned, the earnings per share is up 65% in the quarter, which I think is a quite remarkable number, especially that we should consider that there is no one-time sort of effects in the comp or in the current period of any material size. The strategic progress is also very solid.

We continue to launch important innovations in both digital and also surface mining, as I've talked about. We continue to show good innovation progress also on the digital side, and it was really a milestone that we could start to show bigger common solutions now at IMTS.

We also closed the acquisition of DM Filtration, which also meant that we now have a 24th division in the group. We continue to deliver consistently each quarter, while we also invest into our long-term strength.

There is a volatile market out there, but I think we continue to show that we have the agility and speed in adjusting to meet all the different developments that we see out in the world. I think we have again proven the strength of Sandvik's business portfolio, our strategy, and our operating model.

Thank you for listening. Let's go to the Q&A.

Thank you, Stefan and Cecilia. Yes, indeed, it's time for the Q&A session.

Operator, we can take the first question, please.

Good morning, thanks very much for taking my questions. Two if I can, please.

First on cutting tools, you call that a benefit from pre-buying for the last few quarters, but you talked in the prepared remarks in China as though that's unwound a little bit given the stabilization in tungsten prices there. With European tungsten prices now also seeming to have stabilized, are you seeing any signs of the pre-buying outside of China slowing, ending, or even unwinding?

Or if not, is that something that you would expect to happen in the coming quarters, please? Then secondly, just on the large orders in mining, I think if I take the past four quarters, it's averaged just over 1 billion SEK per quarter.

How should we think about that run rate moving forward, and does the pipeline give you confidence that that could be similar or potentially even higher as we move into Q4 and 2027? Thank you.

Thank you. On the cutting tool and pre-buys, yeah, we saw, as I said, in this quarter about a 2% sort of boost from pre-buys driven by price increases in the quarter that didn't fully unwind within the quarter.

The Chinese impact was if we talk about the pre-buy effect back in the first half of the year, significantly larger. It was very, let's say, unusual type of pre-buy numbers there.

I think it's very clear that the purchasing decisions and tactics there are very, very different. If we look at China year-to-date, it's still a good positive figure, but a lot of pre-buy in the first half, and then starting to, or to a large extent, unwinding now for a couple of months.

The pre-buy effect we have seen outside of China has been much more limited. If you recall, in Q2, we said that orders and revenues and so on, they were fairly balanced.

We still carry sort of a pre-buy effect orders versus revenues from Q1 that we're still having with us. I cannot fully predict.

I think, to some extent, some of this will stay as higher inventory levels as we are also seeing an underlying demand pick up. It's quite usual that we see that in an upcycle.

Maybe some of it will slightly unwind. That is a possibility, but nothing we sort of can predict.

Again, it's not very big numbers we are talking about here, I'm not so concerned about it. On the large orders in mining, yeah, the reason we call out the large orders is because they are a little bit lumpy quarter by quarter.

We had in Q2, it was 1.6 or so, if I remember correctly. Now, it was 700 million.

You talked about the average around a billion plus. I will not guide going forward, but we continue to see high commodity prices, very strong demand underlying in the way our equipment is being used, customer activities, order pipelines, and so on.

I see no reason for why current demand picture will change, and therefore, on average, why sort of large orders would sort of go in any negative direction. Again, it's not a guidance, it's just what we see in the market right now.

Thank you.

Hi, it's actually John Kim from Deutsche. Thanks for the opportunity.

You previously spoke about seeing some better activity potentially in downstream. I'm wondering if you could flush that out a little bit, and I have another question for later.

We know downstream is a little bit more late-cycle. Typically, customers are running the processing plants at a lower utilization rate than sort of a max capacity, which means when things are picking up, they can do without investments for incremental investments for a while.

They also tend to make those investments in larger chunks. With mining equipment upstream, you can add one or two or three loaders or drill rigs.

When you come to the processing plants, you need to take bigger steps, which means that it takes a bit longer before they are ready to commit to that. We are seeing in terms of how we look at RFQs, customer engagements, and so on, that we feel that engagement is picking up, and it should be supportive going forward, even though we didn't see it in the order intake in this particular quarter.

Helpful. If we shift gears back to tungsten, please.

We've seen a pretty strong deviation between the Chinese and European pricing. Have you seen any change in behavior on finished tools or products from Chinese OEMs into domestic or export markets as a result?

No, not really. We have always, or for some years, seen the Chinese here and there, but quite limited outside of China.

They are competing in the mid-market. We tend, as to be primarily in the premium segment.

In the mid-market, there's always been sort of a price-driven competition, this is nothing new. I cannot say that we are seeing things getting better or worse from this dynamic at the moment.

Thank you.

Hi, thank you. Hi, Stefan and Cecilia.

Klas at Citi. My first question is on the tungsten impact, which came in at 100 million versus 200 million guided, and you guide for a flattish impact into the fourth quarter.

I had a question on the absorption impact. The profitability in the mine at these prices is good, you get good fixed cost absorption in powder, now with scrap prices coming down and we start to see APT leveling off a bit as well, how should we think about this line going forward?

Your margin is still 25% underlying including this effect, but curious what could happen here ahead. I'll start here.

Thank you.

Here, as you say, tungsten prices, they came down slightly towards the end of the quarter that resulted in the inventory revaluation effect, and in Q4, we guide a limited temporary impact. Then, of course, depending on how tungsten price develops going forward, it impacts the profitability in Powder Solutions, but we also have offsetting impacts in the cutting tool business over time, and that's how we also create resilience across the group.

Then it is a bit of a complicated picture because, as for our production, we use virgin material from our own mine, we source material externally, we also source scrap material, and we also buy back from our customers used cutting tools for recycling. You need to take all of these factors into consideration.

Overall, we see that we have good margin resilience across the Powder Solutions business and the cutting tools business.

That leads me into my second question on price/cost in cutting tools then. You talk, Cecilia, about the resilience.

The pricing on orders, when I back it out, was up around 11% in Machining, not too different versus the second quarter. We understand that you're now raising prices quite a lot more than that, as the tungsten impact in cutting tools start to now increase here a lot, given the nine-month lag from then when tungsten increased a lot in November last year.

How should we think about pricing in the P&L in the fourth quarter? I calculate that we could be up 15%, 20%, right?

You raises prices a lot here at the end of the quarter on orders. Then thinking about when you guide flat impact overall in the fourth quarter.

Price/cost positive in absolute terms against powder weakening and offsetting that? Any more clarity on price/cost and prices would be very useful.

Thank you.

Yep. Sure.

We made, as you said, a price increase towards the end of the quarter, and with this price increase now, it sets so it will offset the impact of the current tungsten price levels. Then it's, of course, also, just like usual when we make price increases, we also look at how we think more general inflation will develop going forward.

There, typically, we have a slight accretion initially when we make price increases, as we have this temporary timing impact between price and the normal inflationary development coming into our P&L. Then in terms of breaking this down further, we are a bit careful with doing that for commercial and competitive reasons.

The best guidance we can give is that, net, we see a limited impact in the fourth quarter in terms of what is what should be considered

a

temporary effect. No temporary boost or the opposite in Q4.

Okay. Absolute final one on mining on the aftermarket.

The 16% growth, still very strong numbers. You have a big mine planning business sort of in digital, Deswik, where growth should be linked to the strong exploration activity.

I think you also have some tungsten passer-through still in rock tools. If we zoom in on just parts and rebuilds, which are more comparable to some of your peers, Stefan, what was the growth in these segments on orders?

Did growth here accelerate versus the second quarter? Thank you.

I think all components of aftermarket actually in this quarter were growing at relatively similar pace. Parts and services was also up there in the high teens.

That's great. Thank you.

Thank you.

Hi. Good morning, Stefan and Cecilia.

I just have a follow-up on the pricing dynamics in Machining, please. Just wanted to know broadly how are customers reacting to prices falling, and do you see your ability to retain pricing into '27 as unchanged?

Obviously, in the scenario that prices keep falling. Thank you.

I can take that one. Customers are never happy when you raise prices, but I would say this has been one of the more straightforward ones.

It was the same in May, because it's very clear the underlying reasons, and we are not alone either, we can say. I think this is something that the industry recognizes that the reasons are clear, and therefore, they also accept these increases.

This is, of course, why we are so clear and focused on that we do this to protect our margins, but we are not doing more than that even though there currently is to some extent a shortage of tungsten. That's how it went down now.

For that same reason, we don't see why, in general, price increases are not sustainable. Of course, it will depend on what happens with tungsten prices, but if we assume a kind of a main scenario there, we see no reason why these prices are not sustainable.

Sorry, if I could follow up, do you expect maybe competitors to lower their pricing in order to get market share gains? Is there any signs of that that you've seen so far, or do you see any risk of that kind of behavior?

I cannot really comment on what they might or will do, but let's remind ourselves that from a competitive position, we have the best competitive position here with our own mine and over 50% of the input material coming from scrap. Scrap prices are lower than virgin material prices since there's a limited recycling capacity, especially outside of China.

That builds further competitive position for us, and on top of that, at least publicly traded competitors don't really have a margin profile that means that they can sacrifice further margin to try to gain market share, especially knowing that our cost base is probably the most competitive across the board. I feel quite confident that the competitive situation is to our favor rather than the other way around.

Very clear, thank you.

Stefan, Cecilia, Louise. Magnus here from Nordea.

A couple of questions from me. You will be opening up the books for 2027 on powders in the fourth quarter, and given the momentum we have in the pricing within there, could you comment a little bit on the mix impact on pricing, if you see, in Machining in Q4, or potentially, at least help us explain what the mix was between powder orders and cutting tool orders in Q4 last year?

Oh,

that we probably have to come back to. I actually don't remember the split in Q4 or how much we disclosed back in Q4, I will have to come back to that.

Is the thinking right, you should probably have a positive mixing impact in Q4 at least from a pricing perspective in Machining?

You mean from the fact that we're going to open up the book for orders for powder?

Exactly.

Yeah. That I cannot really guide on.

Let's comment a little bit broadly on that. As we have stated in previous quarters, the order intake that you see also this quarter in powder is primarily then a revaluation of the order book to current or to the price levels we actually deliver on, while the actual orders were booked in Q4 or to some extent Q1, typically then a 12-month order.

Then we have kept the order book closed now for a couple of quarters because of this dynamic. We want to make sure that we take the learnings from this year, and as we open up the order books, that the price models and everything is aligned with how the market operates currently.

It's true, yes, we will then open it up in Q4, but I expect also there's to be conversations with customers on sort of updated maybe pricing models or what have you. I think it's a little bit uncertain how much will end up in Q4 and how much will end up in Q1.

It's not only that we don't guide for that, I don't know how it will land. We will, of course, make sure first of all that we protect the business by making sure that we get quality orders into the order book, even if it takes a little bit longer to have those conversations.

I can only say it's going to be tricky to predict that element in Q4, unfortunately. That's how it is.

That's good. Finally, could you explain a little bit the year-over-year delta and magnitude of that was in the cutting tools part of Machining, specifically, could be very helpful to see what's going on there.

You mean pricing versus the tungsten development?

No, no, just the margin delta year-over-year, if you can scope that to some degree in cutting tools.

Yes. If I take Machining as a whole, and then I will also cover the cutting tools there, the key drivers for the margin improvement is good leverage in the cutting tools business.

Also, we have the ongoing savings program. Then we have good profitability in Powder Solutions, sort of underlying at these tungsten levels, and then it's the temporary timing impact.

Those are really the biggest drivers for the margin improvement year-over-year.

Got it, thank you so much.

Hi, Stefan and Cecilia. Thanks for taking my questions.

Just two for me, maybe just taking them one at a time. The first question is just on metal cutting volumes.

Earlier in the call, I think you were referring to a kind of net pre-buy effect. Just on that, if we think on a sort of monthly basis, does that mean that you had a pre-buy positive effect in the first two months and then a negative volume effect in the third month?

Is that the way to think about it?

Basically. Yeah.

Because you get the pre-buy up until the price increase, and then you see a little bit of a drop afterwards. The net 2% we refer to is simply then that our estimate of what the drop should be based on the pre-buys in the first couple of months was not fully compensating then for what we consider to be the pre-buy component.

That's very helpful. Thanks.

Then just another question. You've included a really useful slide on the tungsten price dynamics in Machining, and you've spoken about this before, but you showed that the cutting tool costs has a nine-month lag to the tungsten price.

My question here is that if I look at sort of Q4 '25, Q1 '26, you already had prices going up sort of in metal cutting by sort of 4%, 7%, I've got in what I've calculated. The question here is why were you already putting up prices by that level if there's a nine-month lag to the cost sort of for the cost going up?

On top of that, I think you've also said before that there's a dilutive price/cost impact within metal cutting. I guess that the question as a whole is how does that kind of sort of work if there's a nine-month lag to costs, but you're already putting up prices in Q4 and Q1?

Here it's the picture that we show in the appendix, it's, first of all, a bit of a simplified model, it's the best that we can give you, but we're talking about averages on the one hand. Then for cutting tools internally, you also need to remember that when we do pricing, it's both the APT price and scrap price development that we need to take into consideration for how we do pricing.

That's also true when we look at this from an internal perspective. Ultimately, I think the best way I can answer this, what we are aiming to do is to offset and sort of protect the margin, and that's how we have set the price increase now in the third quarter.

Then it's impossible to get the timing exactly right, because we cannot make price increases every month. Sometimes we can be a little bit ahead, and sometimes we can be a bit behind.

With this price increase that we've done now, that should protect our margin for the cutting tools at current tungsten price levels. I think that's the best answer I can give.

Absolutely. Just to comment on you referred to the let's call it the first price increase there early this, or actually at end of 2025, we usually have a cycle where price adjustments are done in the beginning of the year.

Now, coming up to the fall of '25, tungsten prices started to increase late spring, early summer, actually, last year, even though most people didn't notice unless you were in the industry, because the levels were not at the level they are now. We could already in the fall see that we need to compensate for these higher tungsten prices.

Then the question is, do we wait until the normal cycle or do we pull it in earlier to not be exposed unnecessarily? That one we pulled in earlier.

Then that one is also then containing, as Cecilia mentioned, maybe compensation for general inflation expected and so on. That was our best guess for what we needed to do to compensate in 2026.

Then, of course, they continued to go up, therefore we had then subsequently done additional price increases, but always with the intent that we try to hit this, let's compensate and protect the margin as good as we can predict.

That's very helpful. Maybe just following up on that question there, is there any reason why we might be seeing the costs come through faster than nine months in metal cutting?

For example, the way that you account for inventory for tungsten, is that sort of weighted average cost, and that might be why there's a possibility that we basically see that the cost coming through sooner than with a nine-month delay, if that makes sense?

The nine months, it's an average. It's not true for every product and every assortment, but it's an average.

It depends on the mix, for instance, also in terms of what we sell. It's not a strict one-to-one sort of correlation to this nine months, but it's an average.

If you have a high runner, you might actually deliver a product after three months with a higher tungsten price content, for example, but yeah, this is why we have to work with averages in the sense how we create the model.

Very helpful. Thank you very much.

Yes, good morning, everybody. Stefan, Cecilia, I wonder if you could say what the powder volumes, excluding price, did year-on-year in both orders and sales in the quarter, maybe start there?

They're down double digits on both.

Thank you. Can you say what the cutting tool margin, you talked about the year-on-year development, but could you talk about how that developed Q-on-Q?

Quarter-on-quarter, I think we need to come back on that.

On the margin, James, you mean, sequential?

Sequential. We need to come back on that, James.

Thanks. And...

Just to keep in mind that there is seasonality, as in Machining with Q3 having vacations, and then as Stefan and Cecilia have talked about, we have done for the price increase in the third quarter.

Right. Lastly, if I could, could you say what the percentage price assumptions were that you used in the quarter for Argus and APT?

Price assumptions, you mean for the price increase that we've done or...

No, for the input prices of scrap price and APT, I believe you use those two prices, and there's multiple sources of scrap prices. Given the movements, it'd be helpful to know what number you're using really.

The answer there is, also for us, it's a mixture. It depends on what type of scrap we source.

Also for us, it's varying input prices depending on what type of scrap material we get hold of and how that is priced in the market. It is quite a complex picture.

Argus, to my knowledge, is the only one that is sort of, let's say, a public, even though I know it's some kind of paid service, but it's still a number that you can refer to and you can go and look. Then, as Cecilia says, there are various scrap prices that are simply sort of the dealer price.

There are no public kind of data on it. It's just what you get when you do the deals.

I think Argus is the only thing we can refer to, and then we can just acknowledge, as you say, that there is a spread also here in reality.

Yeah. Thank you very much.

Thank you.

Hi, good morning. Thank you.

I have two questions, but I just wanted to sort of follow up, sorry to a lot of questions on the Machining part, but back when you had the last CMD, you were targeting 22% to 24% margin. You at the time had about 20%.

Should we assume that you've got sort of all of the actions that you had back then, which was pre the big jump in tungsten prices, that you captured all of that, and that your sort of underlying margin is somewhere within that territory, and anything else above that is just tungsten? Or what would you say, there's been other structural things that make this 25% plus now be equivalent to what you envisioned at the time of 22% to 24%, basically trying to get again at sort of how much was that underlying from the actions that you were targeting back then before tungsten price increases?

Yes. You're right, I think.

For the margin corridor that was set for Machining at the last Capital Markets Day, that was before we saw this tungsten dynamics, so that was not factored in to when we set the margin corridor of 22% to 24%. Having said that, though, the margin corridor is a long-term target, and we have said, like with all margin corridors, it can be periods of time where we are a little bit higher than the margin corridor.

We will also come back to this in a bit more detail at the Capital Markets Day in November and explain our thinking here a little bit more, it will be a cliffhanger until then.

Got it. Then just in terms of the aftermarket in mining and the strength that we have carried on seeing in there for a while, would you say this is mainly because just production levels are very healthy, or how would you divide that between what is pure fleet age, penetration of market share being higher versus just healthy production levels?

I think there are a number of factors. One is, what you mentioned, of course, high production levels in combination with an aging fleet, which drives even more demand for service and aftermarket, and in combination with the fact that our fleet has increased over the last couple of years due to strong demand for new equipment.

If you factor all those in, those are three important contributors. On top of that, we have a structural contribution from the fact that the machines we deliver and have delivered in the past three to four years are more advanced.

They are all automation-ready, have a much more advanced sort of control system, they have more sensors, etc., which means that the total amount of service needed per machine has also structurally increased. On top of that, with these more advanced machines, we tend to get a higher share of that service because you cannot do it yourself or you cannot bring in some third-party local firm to do it.

You basically need to have the tools and knowledge that we have. That's also a structural element to this that contributes.

Got it, thank you.

Thank you for taking my questions. If I could just start off with metal cutting and pricing, and if we just to take a step back and without getting into very specific terms, could you give us a flavor of just where we are in terms of the overall price level in metal cutting today, and where you need to take that in the coming months to offset where price of tungsten prices in the market today?

Are we 70%, 80% of the price level increase that's needed? Just some color here would be useful.

As we said, with the price increase that we did now in this quarter, that is set so that we can protect our margins at this current tungsten price levels, and that it also contains an element of compensating for normal general inflation, which is normal when we do price increases.

To add to that, just when we do the price increase and it happens during the quarter, of course, it doesn't happen like this, and it's 100% sort of in all orders we take, you will see, of course, it's a gradual implementation of the price increase even if we communicate it at one day. Certain contracts needs to be negotiated and so on.

There is a lag effect until it has come through fully.

Yes. Then there's also a lag

on the cost

side.

Yes.

For cutting tools.

I guess if we zoom into the mid-market versus premium for cutting tools, I'd assume that tungsten as a cost of COGS for these mid-market players is larger, and so therefore the price hike needed by them would be larger as well to compensate. I guess how different is your pricing now from these mid-market players?

Has it narrowed, and is that inspiring a move into more premium cutting tools in the market?

I think I mentioned this, it was probably two quarters ago, exactly the dynamic you mentioned that, of course, mid-market cutting tools, higher COGS, meaning relatively they have to increase prices more, and that narrows the delta between premium and mid-market. On top of that, of course, then the value proposition from a premium tool, meaning it lasts longer, also becomes more important for customers.

It sort of pushes you in the direction of the premium business model, and this is why I have said that I think overall this dynamic has been good for us or is good for us.

Got it. In powder, given we've seen that large divergence in carbide scrap insert prices and APT, I was wondering if you could provide greater color on the production process of powder.

We understand that scrap has been around 55% of feedstock, but how flexible is this? Could you take this up to 75% or 80% if you wanted to in time?

What's, I guess, the bottleneck or preventing you from doing so? Is it technology?

Is it just the process? Just some color here would also be good.

There is a limit. I'm not sure.

Let's come back on the exact percentage points, but it is so that we can increase from 55%, but I will not speculate. Let's come back with the exact number, but there is a limit where you need an element of virgin material to get the exact recipe and mix right, because with scrap, you get what you get, and then you need to top up with virgin material to get it to what you want to, but let's come back on the percentage of that.

Then

if you increased, would then your pricing change or do you sort of leave your contractual terms unchanged for the mix of your production and feedstock, if you understand what I mean? If you move to scrap or greater scrap, that means that essentially your margin would also benefit from that, or do you then just actually give that back to the overall customer?

Yes, and

then we need to wrap up.

Yes,

please.

All right, thanks, Louise. It varies from customer to customer.

This is down to the specific commercial agreements that we have with different customers, this will vary. That's the short answer.

All right, thank you very much. We are at the end of the webcast.

Before we close, though, I want to repeat Stefan and Cecilia, we have our Capital Markets Day November 24th and 25th. If you haven't signed up, please do.

It's still time. With this, thank you all for calling in, and wish you a good rest of the day.