A warm welcome to this call focusing on SKF's performance in Q3 2026. Also, this quarter we improved our margin and organic growth, supported by a selective higher OEM demand and stronger commercial execution.

This was definitely evident in our Specialized Industrial Solutions segment. I'm Sophie Arnius, heading up Investor Relations, and with me I also have our CEO, Rickard Gustafson, and our CFO, Susanne Larsson.

There will, of course, be opportunities for you to ask questions after our presentations, and there are two ways to do that. If you have dialed in via the telephone line, you press star and 1.

If you are instead watching via the webcast, you can already now type in your questions, and you do that in the tab that you find above the slides. Without further ado, Rickard, it's great to hand over to you.

Thank you, Sophie, and good morning to all of you, and thank you so much for joining us for this earnings call. I'd like to start by us reflecting a bit, and I'm very pleased that we are now starting to see the end in our strive to establish two competitive and strong and fit-for-purpose businesses.

After the approval from our shareholders at the EGM on October 1st, we are now starting to look somewhat different. As you will hear us report today, we are now viewing Automotive as discontinued operations, while our Industrial business is treated as continuing operations.

Bear that in mind as we go through the numbers, but looking into the quarter and then focusing primarily on SKF continuing operations, i.e., our Industrial business, here we saw a strong organic growth of 4.3% in the quarter. The organic growth is driven by high demand in selective OEMs, such as defense, drives, and infrastructure, but also strong growth in Specialized Industrial Solutions, and there we have especially strong growth in aerospace and magnetics, which I will come back to shortly.

Turning to the profitability, and the adjusted operating margin is actually also coming in strong in the quarter, up 0.9 percentage points versus last year at 16.3%. The drivers here are strong commercial execution, a continued margin expansion in Specialized Industrial Solutions, and we also see a good progress in the execution of our rightsizing program.

Here we're actually announcing today that the target to reach the 2 billion run-rate savings, somewhat six months ahead of what was communicated earlier, i.e., we expect to complete that by the first half '27 rather than the second half '27 as per communicated earlier. Cash is also up versus last year to 2.1 billion, and here we see that our higher operating profit more than offset components inventory buildup that we have in the quarter to support growth, especially in Specialized Industrial Solutions.

Turning to our growth by region, and starting with EMEA, our largest region, where we see a broadly unchanged demand. Here I would like to say that light industry performing somewhat better than heavy industries, but we do see some good green shoots in drives, high-speed machinery, and also in defense.

Specialized Industrial Solutions is also growing nicely in the region, and here aerospace is standing out somewhat ahead of the others. In Americas, very strong organic growth, touching 10%, as you can see on this chart, where we see a strong improved demand in key OEM markets.

Here I'd like to mention data centers, defense, off-highway, but also Distribution & Services have had a good quarter in this particular region. China and Northeast Asia, flattish growth, as you can see, but this should be viewed in the light of rather tough comparison in rail and wind over the same quarter last year.

We do see good growth, though, in distribution and machine tools, and also here in commercial aviation is starting to pick up quite significantly. Finally, India and Southeast Asia, very strong growth, almost 12% organic growth.

Growth, we see it across most industries, some that stands out in particular would be distribution, heavy industries, while from a geographical point of view, we see very strong developments in India and Vietnam. If we then leave the geographies and start to take a deeper look on our segments, and starting with Bearing Solutions, which represent in this quarter 74% of sales and 85% of our adjusted operating profit.

Also here, we see good organic growth of almost 3% in the quarter, and as I said on the previous page, it's primarily growth in Americas and in India and Southeast Asia, while it is more flattish in the other geographies. On a side note, if you may recall last quarter, we announced a venture in the humanoid space with Leaderdrive, and that initiative is progressing according to our expectation and plan, and we are still targeting to have that operational by the end of this year.

Looking into the profitability and the adjusted operating margin, we see a slight improvement to 18.8%, clearly driven by strong development in price/mix that contributes, but also that we have the positive impact from the rightsizing initiatives that are progressing faster than anticipated, as I mentioned. In this quarter, we have had some production related to the automotive separation, but the impact on our earnings has been non-material in this quarter.

Turning to Specialized Industrial Solutions, as you can see here, representing 26% of net sales in the quarter and 23% of the adjusted operating profit. Very strong organic growth, and all four business units that make up Specialized Industrial Solutions, they actually grow.

As I mentioned before, magnetics and aerospace are growing at an even higher pace than the other two. The key growth drivers or growth verticals for magnetics, I would say, is data centers and semiconductors, and I will give you some more details on magnetics shortly.

The adjusted operating profit is improving very nicely, 2.4 percentage points to 14%, and the key drivers here is the solid price/mix, to some extent driven by pruning and portfolio optimization activities that we have taken in the past that now starts to bear fruit. We also have the fact that, as I mentioned, magnetics and aerospace are growing somewhat faster than lubrication and seals, which also contributes to a positive mix in the quarter.

We also see a continued solid profitability development in our lubrication business. All of this is offsetting the general inflation, and also some negative mix effect that we have where we have high demand in some products that comes with some higher material cost.

That will also be seen in the bridges as we more go through them. Then turning to the discontinued operations, i.e., our Automotive business.

Here we are still seeing a rather volatile and weak demand. We have a negative growth of 4%, where we primarily with a weak development in Europe, while we had a strong development or strong momentum in commercial vehicles and also aftermarket in Americas and China and Northeast Asia.

The adjusted operating profit, though, is improving quite well to 4.6% in the quarter, despite the negative volume. Again, here we see a very solid price/mix and good commercial activities in general, and also the fact that commercial vehicles and aftermarket is growing somewhat faster than light vehicles, which also has a positive mix impact.

We also have some currency tailwinds, actually, in the quarter, that partly offset the inflationary environment that we also are facing. Overall, demand remains challenging, as I said, and especially in Europe, but further improvements in our commercial capabilities really supported the improved profitability despite this rather volatile demand.

If we leave the numbers for a second until Susanne will come back with the details, I'd like to give some highlights on some strategic initiatives that we are working on, and also give you some more color to our magnetics business. Starting on the left-hand side of this page, our Magnetic Solutions business is roughly a half 1.5 billion business, Swedish krona business, enjoying solid double-digit growth over the last few years.

The growth is driven by good development in certain industrial verticals, such as data centers, semiconductors, and energy. To support customers in those particular verticals, we have a full-suite offering where we have the magnetic bearings, we have the high-speed electrical motors, we have the electronic control cabinets, and the frequency drives, all combined with very sophisticated condition-monitoring capabilities that actually supports the whole ecosystem.

This ecosystem, it provides significant value for our customers. It enables a significantly enhanced energy efficiency, as up to 30% is not uncommon for customers to capture.

We see an increased uptime and less maintenance, where we have no mechanical contact, reduces the risk of failure, and this provides a very attractive life-cycle equation for our customers. We do see that these solutions are very clean, silent, and compact, and an oil-free system is, of course, ideal for applications that require high level of cleanliness, such as in semiconductors and also in hospital applications.

Via our embedded sensors, they can really control and monitor the whole ecosystem, and it also a perfect for scaling AI, another key value for our customers. In order to secure growth in this highly interesting vertical or segment of ours, we focus on three pillars.

First, in order to meet the growing demand, we need to scale our manufacturing capacity. This is particularly relevant for our production facilities in Morocco and the build-out in China.

It goes both for scaling manufacturing, but also driving automation in those factories to secure that we can meet the demand. Secondly, we are building for the future, and we continue to invest in R&D to stay relevant in these key verticals such as data centers and HVAC, semiconductors, and energy.

We are also exploring into new geographical areas and trying to find ways to also grow in the Asian markets. Then finally, we are also securing a broader value creation for our customers.

With our built-in sensors and the ability to scale AI, we can build even stronger customer relationships by providing optimization in areas such as energy consumption, system performance, and asset life-cycle management. All in all, these three pillars, they provide a very solid growth platform for our magnetics business.

Leaving the magnetics and turning to the Vartivo journey. As I mentioned in my opening remarks, we had an historical event on October 1st with the EGM, where the shareholders approved to distribute the shares of its Automotive business to the SKF shareholders.

What should you expect next? That's what we're trying to outline here on this chart.

In November, you will receive a prospectus, followed by a Capital Markets Day hosted by Vartivo on November 17th. For all of you that have interest to join that, which I hope is quite a few of you, then you should remember to register before November 3rd to take part of that exciting event.

Then the ambition is to have the first day of trading at Stockholm Nasdaq on December 1st. As you also may recall, earlier this year we announced a change in the scope somewhat, where we were transferring some additional production channels to Automotive.

We did that because it benefited both businesses. For Vartivo, it provide faster track towards self-sufficiency, and for SKF, it reduces the need for future footprint optimization.

The vast majority of all the assets and production lines now sits within Automotive, but with only few channels or production units to be transferred to Automotive, and that will happen in early 2027. This means that the contract manufacturing will start to decrease from Q2 2027 and then further accelerate until mid-term.

That is what you should expect related to the contract manufacturing. With that, I would like to hand over to Susanne to take you through the numbers in the quarter.

Good morning, everyone. Yes, let me try to enlighten a little bit more on the financials, starting with the profit and loss then.

As Rickard said, this is where we are now talking about continuing operations for the majority of our financials, where the net profit is still including our discontinued operations. Again, then, for continuing operations, we saw a net sales that increased 5.5% quarter-over-quarter, sorry, year-over-year, this Q3.

This was driven then by the organic growth of 4.3%. We had a positive currency of 1 1.7%, and it was somewhat offset with a negative 0.5% of structure.

The adjusted gross profit margin was largely flat year-over-year at a 34.9%. While price/mix and volume were positive contributors, we faced increased material, utilities, and logistic costs, together with a general wage inflation that impacted negatively.

We also had some separation preparations causing production disturbances in the Q3. The adjusted operating margin was strong and improved with almost 1 percentage point to 16.3% year-over-year, and I will get more into that on the following page.

Moving on to items affecting comparability in continuing operations, we had -67 million of those, and that was explained mainly by a profit from a divestment of shares in associated company, our Ningbo Huatong roller company in China, and that contributed with a positive 118, that was then further reduced by 86 million related to the automotive separation and another 68 of optimization of footprint and some other adding up to 31. This net net allowed us to have a net profit that improved 490 million compared to last year to 1.8 billion, and that is explained by improved performance, together with less 320 million less of one-off cost this year, Q3 compared to last year.

Similarly, then, the earnings per share improved to 3.9 compared to 3.5 last year. If we then add the discontinued automotive operation, our net profit for the SKF Group was further reduced by 349 million and ended at 1.4 billion.

This corresponded to an adjusted earnings per share for the SKF Group including automotive of 4.2 compared to 4.0 last year. Finally, then, IAC for discontinued operation ended at a negative half a billion, which is mainly explained by separation-related costs.

Let's then look at the drivers of the strong adjusted margin in continuing operation. Starting from the left, then, with organic growth, we have the strong organic growth of 4.3 percentage points that is driven by price/mix and volume, and all of this improved the operating margin by 3.3 percentage points.

We saw selectively higher OEM demand, together with a strong Specialized Industrial Solution continuing their commercial execution very well. This quarter, the earnings impact from support production relating to automotive separation was non-material.

Coming back to Specialized Industrial Solutions, then, this is where we had an increased production volume to cater for stronger demand in selected markets, and that contributed nicely to our organic result. As and as we had stronger growth in aerospace and magnetics, this resulted in higher cost from a different material mix than last year, which is impacting the cost development negatively, but all in all, a positive net result from all of this.

If I remain on the cost development, we did face higher cost from material, utilities, logistics, and the general wage inflation, together with ongoing transformational initiatives. Still, our rightsizing program contributed with some 350 million and continue to more than offset the separation-related negative synergies.

As Rickard mentioned before, we now expect our program to reach the 2 billion annual run-rate already by mid-2027, which is about half year prior to the original plan. We also continue to largely compensate tariff costs through price adjustments, and we expect to continue to do so also in the coming Q4.

Net net, the cost increases that impacts EBIT margin is a negative 2.7 percentage points, however, was more than offset by the very strong organic growth. The impact from the currency turned positive in Q3 with an EBIT impact of 98 million, and this was mainly this quarter driven by a stronger Chinese yuan vis-à-vis the Swedish krona year-over-year, resulting in a margin effect of 0.3 percentage points.

Finally, then, the structure is the net of the divestment of the aerospace business, Eldim, together with the acquisition of J-Tech that we completed by July, and that has a negligible impact on the on the operating margin. Moving on then to cash flow for continuing operations.

The EBITDA in Q3 amounted to 3.6 billion, compared to 3.2 billion last year. Our non-cash and other came in at a -422, which was in line with last year's cost, sorry, cash, and the tax paid was 515.

Moving on to net working capital, we generated a negative cash flow of -587, which, compared to Q3 last year, was 266 worse. This deterioration is explained by an inventory buildup fully in Specialized Industrial Solution, and to the vast majority, explained by material stock that is built up to support continued growth.

Net net, our operating cash flow came in at 2.1 billion, compared to 1.8 last year. In the cash flow for this Q3, we have some negative 500 million that is related to IAC payments from restructurings, as well as the automotive separation, related then to the continued operation.

We had a CapEx for the quarter of a negative 529 million, and net net cash flow after investment ended at 1.546 million Swedish krona. Moving on to KPIs that we have here on the right to the picture, net leverage and return on capital employed for the continuing operation, we saw that net debt in relation to adjusted EBITDA ended at 1.1, and the return adjusted return on capital employed was 15.3%.

As a consequence of Automotive by Q3 being reported as a discontinued operation, the KPIs here are based on the Q3 capital employed for continuing operations rather than having what we normally have, a rolling 12 months average balance sheet. With Automotive then being separated out, we do not really have comparable balance sheet data historically for the continuing operation, let me instead try to relate to the SKF Group including Automotive to allow for some comparisons on these KPIs.

Again, SKF Group then including Automotive improved the net leverage to 0.8 compared to 0.9 in Q2 as well as last year. For the adjusted return on capital employed, then, with the SKF Group, it also improved and would have been 14.7 for the SKF Group including Automotive compared to 14.5 previous quarter and 14 last year.

That's a reference. Moving on then, outlook and guidance for the continuing operation.

We expect the sales to strengthen somewhat in Q4 year-over-year. This because we see a similar market environment as we were facing in the in the Q3.

However, we still have market volatility, and that allows for continued uncertainty. Currency guidance then for Q4 and for continuing operation, we estimate to have a positive 150 million impact based on the exchange rate that we saw by the end of September.

If I then turn to the guidance for the full year, the tax rate for the continuing operation, excluding divestments and separation of Automotive, is estimated to a full year of 27%. When it comes to the additions to property, plant, and equipment for the year, we anticipate that to end at 2.5 billion.

If we look at the guidance from last quarter, the previous guidance, this corresponds to a further decrease of half a billion due to optimization of SKF's continued operation and the planned investments that we have ahead of us. The full-year guidance for items affecting comparability relates to the full group, including Automotive, considering the automotive separation finalizing during Q4, and that allows us to remain at the range of a negative 2.5 to 3 billion kronor, and this is fully in line with what we have communicated at the Capital Markets Day.

Then finally, as Rickard mentioned, with the changed automotive separation scope that we announced early this year, we have moved additional production lines to Automotive. This has a consequence of the one-off costs related to the automotive separation, we are increasing those with approximately half a billion from 2.5 to some 3 billion Swedish krona.

However, the industrial footprint optimization is lowered by the same amount, because we will have less optimization need for the continuing operation than what was originally anticipated. With that, we stay we stay intact with what we committed to at the Capital Markets Day last autumn with the total expected level of IACs in the coming years, and we do not see an impact of this overall.

By that, I come to the end, Rickard, and over to you for wrapping up.

Thank you, Susanne. Before we move into the Q&A, let me just take a few minutes to summarize the highlights of the quarter then.

As I mentioned, we do see strong continued growth and margin expansion in SIS, which is very pleasing, and in the quarter, as I mentioned, is up 2.4 percentage points. This is an important part of the journey that we laid out to all of you for our Industrial business at the Capital Markets Day in November last year.

We also see a solid momentum in delivering on our rightsizing savings, as you heard both me and Susanne mention. I think this is a positive sign on our ability to execute on the initiatives that we put out to do for ourselves, and I'm especially pleased that we're able to do this in parallel with separating the company into two, and still stay focused on our customers and capture the growth that is available in the market, as you also heard us talk about.

Magnetics, it's an exciting business. It's not the largest business unit of ours, but it's a strong-growing and well-positioned, as I hope I was able to articulate to you, that we do see that it's well-positioned for structural growth as we move forward.

Then finally, the Vartivo listing. I do see the EGM on October 1st as a milestone in the history book of this company.

We are now seeing the end of this journey, and we are excited to complete it and see our colleagues ring the bell in Stockholm on December 1st. As I mentioned, there is a upcoming Capital Markets Day on November 17th.

Don't miss it, and in order to not miss it, you need to register before November 3rd. With this, I thank you for your attention, and I hand over to Sophie and the Q&A session.

Thank you. Thank you, Rickard and Susanne.

We have now around 30 minutes for Q&A, and I can see that quite many of you are eager to ask questions, please limit it to one question per person. If time allows, you are very welcome to rejoin the question queue.

Let me, before we start here, remind you on how to ask a question. If you have dialed in via telephone, you press star and 1 to ask a question.

If you would like to withdraw that, you press star and 2. For our webcast audience, you can type in your questions in the tab above the slides.

We will start with a question from the telephone line, and it comes from Chit Sinha at J.P. Morgan.

Chit, please go ahead.

Hi. Good morning, guys.

Thank you for taking my question. I just wanted to get a bit more clarification on the near-term guide.

You delivered a solid 4.3% in Q3 and are expecting similar market conditions in Q4. It seems to me that maybe comps are a bit easier in Q4, I'd imagine a bit better growth rate.

Is this the right way to think about the guide, if there's any headwinds to be aware of, that would be really helpful to touch on? Then if you could also touch on the pricing contribution, both in Q3 and how you're thinking about this in Q4?

Thank you.

Let's have Rickard responding to this question. Sure.

On the growth forecast for Q4, we do foresee a maintained rather volatile environment. We do see, as I mentioned, strong growth in certain geographies, while we still have some hesitation, especially in Europe, among some of our distributors that still are somewhat hesitant to fill their inventories due to the volatile environment.

As always, there are also some volatility and some kind of comparisons quarter-over-quarter that also you should consider. We do foresee roughly the same activity levels, and our best estimate is the somewhat improved growth in the fourth quarter.

Still, given a lot of uncertainties, we're staying at that best outlook of ours. Then on pricing, we always try to be very forward-leaning here and be proactive.

We start to see that energy and logistic costs started to move during the first half of the year, so, as you may recall, we took some pricing actions then. We will continue to monitor this very, very carefully, and if we see the need to try to push further price, we will definitely do that.

Of course, as always, continue to drive work with our own efficiency to compensate for the cost inflation. We do not see right now that the cost inflation will materially change in Q4 versus Q3.

Also that I believe also answers John Kim's question that John sent in from Deutsche Bank here around price. Let's continue with a question from the telephone line, and it comes from Klas Bergelind at Citi.

Klas, please go ahead.

Thank you. Hi, Rickard and Susanne, Klas at Citi.

First on the bridge. It doesn't seem like overproduction was a big driver, but you had high production levels in SIS, good utilization, you also had good mix there because of aero and magnetics.

I'm trying to understand how sustainable this is. The end-market outlook for aero and magnetic seems good.

How should we think about seasonality for Specialized? Do we have a step down in the margin in the fourth quarter, or will that be more marked in Bearings, including the one-month impact from contract manufacturing?

Thank you.

Let's have Susanne answering this question.

As you are rightly saying on the bridge, that we have positive impact from price/mix and volumes that are, to a large extent, compensated by increased cost then. One reason of that is also, as you rightly state, the SIS mix impact, where we have a higher growth in aerospace and magnetic, allowing for a mix shift with higher ingoing material components.

We were also facing some separation-related activities that impacted our production efficiency in Q3, and this was then the last quarter of that kind of separation taking place, now having Automotive fully as an independent company. We also saw, as an example only out of that, that having to turn electricity into two separate entities, that allowed for some disturbances in this quarter that we were facing, that we do not anticipate to see in the coming quarter.

We also didn't have a lot of support production for Automotive in this quarter when it came to overproduction, as we could see more of in Q1 and Q2, and that we are not seeing in this quarter either.

Klas, on your question there on seasonality for Specialized Industrial Solutions in terms of margin, unfortunately, we don't have that long history here, only two two years quarterly. The sense is that they follow the same patterns as Industrial.

Q4 is seasonally lower from a margin perspective than Q3.

Correct. Hopefully, that

answered your question.

Super quick one for you. Super quick.

Thank you.

We will continue with a question from the telephone line, and it comes from Alex Jones at Bank of America. Alex, please go ahead.

Thank you. Maybe just to follow up on cost inflation.

Can you confirm that your pricing actions that you took and you talked about in H1 offset the input cost inflation this quarter? Or did you need the sort of additional cost and rightsizing that you're doing to do that?

Then you talked about sort of no material change in cost inflation into Q4. Could you just talk about what you're seeing into 2027 at this stage, recognizing that there's still a couple of months left in the year?

Thank you.

Let's hear from Rickard on this topic.

Right. Without disclosing all the details, but in general terms, I think our price actions and also commercial activities has helped to a large extent mitigate and offset the cost inflation.

Then, of course, we also drive, as I mentioned, efficiency measures in the business. We are actively looking into price opportunities.

We will continue to do selective price increases wherever we can. We monitor the development in the cost base, especially when it comes to energy and logistics and materials, and if it's deemed necessary, we will do our utmost to put further prices into the market.

My comment regarding the outlook in terms of cost development and inflation was related between what we believe is going to be in Q4 compared to Q3. I have no comments on 2027 at this stage.

Thank you. We will continue with a question from the webcast, and it comes from Daniela Costa at Goldman Sachs.

It's, I would say, more of a CFO-related question here, Susanne: so if there will be further restructuring required in the industrial divisions then, Bearing Solutions and Specialized Industrial Solutions, following the automotive spin?

We launched our initiative in June last year 2025, and that was there to fully offset the synergies and allow the industrial business to be in a good shape. At this point in time, we do not anticipate additional restructuring of that kind.

What we have talked about in the capital market is that we still remain to have footprint optimization initiatives ahead of us, and that we are planning and working through in detail as an industrial pure-play company. Having said all that, we will, of course, continue to work on productivity measures along the way forward, but nothing else than what we have talked about already.

If I may, just to reinforce what we said at the Capital Markets Day in November last year, that these remaining transformation initiatives, or rightsizing initiatives, is the right word to use here, will end by mid-term. Thereafter, we should not have this high level of items affecting comparability anymore.

Thank you. Let's continue with a question from the telephone line, and Anders Idborg at ABG.

Please go ahead.

Morning. Thank you.

Just maybe on this change of CapEx guidance, you're now running at more like 3.5% of sales in the remaining business. I guess part of it is related to the accelerated shift to Automotive, I suppose.

Or could you help me with that? Is that a new level that you think you can sustain?

We talked previously about 5% in an intermediate term.

I will ask Susanne to respond to this. She's eager to answer.

Eager to answer. No, we will stay with the guidance we allowed for at the Capital Markets Day, where we said that in the next few years until mid-term, we will have a higher CapEx level to then gradually come down.

You are right that this very year, we have been extremely busy, both with our separation activities, but also taken the opportunity to reassess what we had in the pipe and been able to actually challenge and reduce that scope. I think this is not how you should read the continuation.

We stay with what we announced at the Capital Markets Day last November.

Thanks.

Thank you. Let's continue on the perhaps CFO-topic questions.

I have questions on our working capital, both from Olof Cederholm at SEB and Rory Smith at OxCAP here, sent in to us. If we can talk then, Susanne, about the net working capital in the industrial business, 38% of sales in the quarter, up from 32%, and that's 32% group then, including discontinued.

Also on how this trend in the coming quarters will look like, and our medium-term ambition?

Starting about the current trend where we have deteriorated from a 32% to 38%, as you rightly say, and in this quarter, it's fully explained by the Specialized Industrial Solution building channel stock to cater for further growth then. We do see a somewhat of a reduction in our Bearings business.

I think, all in all, what we do remain with is the guidance of the longer term, where we should then improve and normalize and further improve as we communicated at the Capital Markets Day. I think it's fair to say that we have some stocks still remaining in our inventory that has been disturbed by the separation activities that has been ongoing, and where we have had that in the Bearings business particularly.

It's also correct that we will remain with a somewhat higher channel stock in SIS that we are gradually reducing as we move along.

I can just also remind ourselves what we said at the Capital Markets Day in terms of working capital targets, and mid-term around 29%, and this is for continuing operations, SKF post-separation, and long-term 27% of sales. As Susanne said here with Specialized Industrial Solutions, we are on a higher level to cater for growth, and we don't expect that to come down in the short term here.

Hopefully, Olof and Rory, that answered your questions. Let's continue with the telephone line, and we have Andre Kukhnin at UBS as first out here.

Andre, please go ahead.

Yes, good morning. Thanks for taking my question.

I just wanted to take a step back and ask a broader question on the kind of margin mix between the two divisions, Bearing Solutions and Specialized. That lower margin profile of Specialized, is that just simply the business mix, with lubrication being lower, or is it reflective of maybe different aftermarket versus new equipment mix, essentially just trying to get an idea whether there is scope for Specialized to catch up to where the Bearing Solutions business is already, with maybe further pruning or just the growth that it's delivering?

Rickard, please respond to this question.

I'd be happy to. This is an important part of our long-term value-creation plan, because to be brutal and honest, we don't really see any real structural drivers why the business units in Specialized Industrial Solutions should operate at a lower profitability margin than the Bearing Solutions business.

They should be roughly on par, and that's what we're aiming for in our long-term plans, and also even in mid-term, we should get there and then build from that for the long term. That's really part of the equation here.

Thank you.

Thank you. Let's continue with a question from also the telephone line.

James Moore, Rothschild and Company Redburn. James, please go ahead.

Thanks, Sophie. Good morning, everyone.

Hope you're all well. I wondered if you could help me with some quantification behind the cost development line a bit more.

Susanne, thanks for your comments. Obviously, input costs are a massive theme at the moment.

I see 100% freight rates, 20% steel, higher oil, and I guess price/cost management is going to be critical going forward. Is there any way you can scale the raw material, logistics, and energy headwind in the quarter?

Did you say earlier that basically that headwind is slightly bigger than the price/mix positive, maybe, I don't know, 300 million together, is that the kind of magnitude? More importantly, how do you think that moves going forward?

Is that number from current spot rates, assuming they hold? Have you got visibility that that number gets materially bigger, and when do you see, at current market prices, the year-on-year bridge impact on input costs hits the peak point?

If you could talk about whether you think you're going to be able to price that, and whether there'll be any timing mismatches, or you think you move the price at the same speed?

Susanne, a question for you then.

Thank you, James. I will really repeat what Rickard has already said.

I think that we are monitoring all the input material and cost very, very detailed, and trying to take the appropriate measures. We have acted already in the market earlier this year, and we are continuing to assess when that is appropriate to do again.

I think we stay with what Rickard have said in the quarter, that we have been able to compensate to big extent, and we don't see a big difference also in the coming quarter.

Any chance of talking about whether it gets materially bigger? Thank you, Susanne.

Let's continue with a question from Andreas Koski at BNP Paribas. Andreas, please go ahead.

Thank you. Thank you very much.

I have a question about the near-term outlook as well of somewhat higher organic growth. I think that implies a deceleration in the year-over-year organic growth to a level below 4%, at least.

I wonder if you can talk a little bit more about what you're seeing in both Europe and China, because looking at the organic growth now in the quarter being 0.5%, I guess that implies that volumes are actually declining year-over-year despite some leading indicators implying that industrial activity is improving. Why do you think that you're not seeing many volume growth coming through?

What are you hearing from your customers, etc., in both Europe and China? Thank you.

Let's hear from Rickard on this topic.

Right. As I tried to explain before, there are some uncertainties and also the activity levels in the different geographies that creates this foundation for the guidance that we provided.

I'm not saying that it's a deceleration as such, but we do see the same activity levels, but that's our guidance that we are providing. Turning to your question about activity levels in Europe, you're right.

PMIs are moving and started to move in the right directions. We do see that clearly that also in our business that we have bottomed out.

We start to see signs of an improvement in the underlying activity levels and in our order books, but the speed of change, if I may use that term, is not as aggressive as it had been in Americas or in India and Southeast Asia. As I also mentioned, in Europe, we do have a sizable distribution business, and there is still some hesitation among many distributors to really dare to be more forward-leaning and aggressive in this volatile environment.

In China, I do believe that we do see solid underlying development in many industrial verticals, but we're also facing some tough comparisons on some large exposure that we have in rail and wind historically.

Understood.

Thank you very much. Thank you.

Let's continue with a question from Tim Lee at Barclays. Tim, please go ahead.

Hi, thanks for taking my question. I have the question on margin again.

If we look at the bridge, we have a very strong organic contribution. Can you give us a bit more color or detail on contribution from volume and price/mix, respectively?

Also, more specifically on SIS, I think the organic growth is actually more than 100%. Can you give a bit more color?

Is this more on pricing or on utilization, or is due to the mix that you just mentioned with the higher contribution from magnetic and aerospace? Thank you.

A question suited for Susanne, I would say.

Yes, hey, Tim. When it comes to general for the continued operation, we have a good both price and mix, as well as volume impact, and that is further fueled by the Specialized Industrial Solution.

Within the Specialized Industrial Solution, we also have a somewhat of a mix effect, as we have talked about, where we have had the two business units, magnetic and particularly aerospace, growing ahead of the other one, so that also contributes with a mix impact. We had strong price/mix and volume implications that has impacted SIS particularly, but also the industrial business all in all.

As we talked about previously here with this strong growth for Specialized Industrial Solutions, to cater for that, we also had strong production volumes, and that's showing in the organic column in this bridge. We also talked about this also results in higher costs driven by a different material mix as there is more expensive material for primarily then magnetic and aerospace compared to last year then, the mix then.

That is showing in the cost development column for Specialized Industrial Solutions, and of course also the continuing operations bridge. You have to have this both, look at them together, organic and cost development, due to how we report this.

All in all, it's a very good earnings impact from this, and also let me emphasize that Specialized Industrial Solutions, the inventory we have built has been on components and material, not finished products, good sell-out also in the quarter. We have a follow-up question from Chit Sinha at J.P.

Morgan. Chit, please go ahead.

Hi. Thank you for taking my follow-up question.

At Q2, you mentioned that there might be a temporary benefit in Q3 on the cash side relating to tariff refunds. Do you mind quantifying that benefit in Q3, and then obviously, I think maybe the outflow you'd then expect for Q4?

Thank you.

Susanne, please.

The tariff refunds, yeah. We have very limited impacts in Q3, because what we had was a positive tariff refunds in Q2 that we also then adjusted our price mechanics for.

We had a very limited effect in Q2. The settlement of that from a cash flow perspective is gradually taking place during Q3 and 4, and that is also not really visible.

That's the impact out of that in the Q3 alone.

Thank you,

Susanne.

We will continue with a follow-up question from Klas Bergelind at Citi. Klas, your line is open.

Thank you.

Thank you for the follow-up. Rickard, did you see some temporary boost to the growth in Americas?

Was there any sort of lumpiness to it, any projects that drove growth that will roll over? Did you see any pre-buy anywhere ahead of possible price increases?

Obviously, you're saying that you will do your utmost to increase prices. Doesn't seem like you will do anything quite soon, but nevertheless, was there any pre-buy, do you think?

Then also on the input cost inflation, it will be similar fourth quarter versus third quarter, but if we look at the current inflation, whether it's freight, steel, energy, etc., and we sort of try to be a bit forward-looking, our models suggest that the 450 million net will increase quite materially into the first half of '27. If you could comment on that.

Thank you very much.

Rickard, please.

When it comes to the growth in Americas, yes, there have been some pre-buys, especially in agriculture in the quarter. Then we also have had some project-related initiatives.

The underlying is clearly strong general improvement in the OEM market as we anticipated. Then on your questions on cost development, and if I understood you correctly, you were asking more for 2027, and as I mentioned, I'm not in the position to comment that at this stage.

That will be something that we do when we release our Q4 numbers.

I can just add that there is sometimes a lumpiness in our sales, not necessarily pre-buys. Hopefully, Klas, that clarifies it.

We will continue with a follow-up question from Andre Kukhnin at UBS. Please go ahead.

Oh yes, great. Thanks for squeezing me in.

I just wanted to double-check first from the earlier Q&A in your comments that the impact from overproduction in Q3 was immaterial, is that correct? Then if I may also, could you just comment on how Q3 actually progressed in terms of kind of monthly cadence of growth?

Was kind of September surprising in any way, and how is it looking so far into October?

To your first question, and yes, it was very limited. Let's hear from Rickard on your second question.

Sure. Nothing stands out in this quarter.

The Q3 for us always indicates a rather strong development in September since we have the vacation period in the beginning of the quarter. That was the case also this quarter, but this year, but as I said, this is kind of more normal for us.

Nothing that stands out. The trading environment, as we now a couple of weeks into October, it's really in line with our expectations, in line with the guidance that we have provided.

Nothing new there to report.

Thank you, Rickard. Time flies, and we need to wrap up this call.

That was our last questions. Rickard, I hand over to you.

Thank you. Thank you for joining this call.

We do think that we close a rather strong quarter with growth of 4.3% and an improvement in our adjusted operating margin to 16.3%. We do see that we have strong commercial execution.

We are putting our rightsizing program forward six months, and we have had a rather kind of important event in October that enabled us to really move forward and finalize the automotive separation. I'll leave with that and a rather strong quarter and some highlights from us, and I thank you for your attention.