Sandvik AB (publ)

Ann-Sofie Nordh - Vice President of Investor Relations Olof Faxander - Chief Executive Officer Mats Backman - Chief Financial Officer

Guillermo Peigneux - UBS Anders Roslund - Swedbank Sebastien Gruter - Exane BNP Paribas Andreas Willi - J.P. Morgan Peder Froelen - Handelsbanken Capital Markets Alexander Virgo - Nomura Graham Phillips - Jefferies

Greetings to you all and welcome to the presentation of Sandvik’s Result for the Second Quarter of 2015. As per norm we will run through the presentation with our CEO Olof Faxander and our CFO Mats Backman after which we will do a Q&A session.

And without further ado, I’ll hand over to Olof Faxander to start off the presentation.

Thank you very much Ann-Sofie. Welcome everybody here in Stockholm and everybody listening on the web to this presentation for our results for the second quarter 2015.

To start with, to summarize the quarter as a whole, I’d like to point to something. First is we had a very strong cash flow in the quarter.

Actually the highest we’ve had for five years in the Group and that is basically based on the fact that we’ve managed not increase inventories in the way we normally do seasonally in the second quarter in the Group. So with a good continued focus on our net working capital management.

The earnings grew quite significantly compared to last year. A lot of course driven by the strong positive currency effects that we’ve been seeing now for a couple of quarters.

This quarter we had SEK775 million of positive currency effects affecting the Sandvik Group. But also we have good progression on our savings efforts and we had savings in the range of 162 million Swedish Kroner.

In this quarter, within the Sandvik Group and all our savings programs, and of course the largest one is our supply chain optimization program are running according to plan and delivering the results that we expected to get after that. The market is such has been quite soft and that more or less goes across the board.

Europe has seen maybe a bit better performance than what we’ve seen in other parts of the world with quite stable demand and some signs of improvements in the western regions of Europe here and mainly then, I would say in the industrial segments where mining and construction have been areas which have been a bit tougher in Europe while SMS and SMT have been areas that have seen somewhat better. North America comes in on a lower level, but we see a stable development through the quarter, so we don’t see any declining trends in North America.

So, the lower activity level has stabilized at the level that we are seeing right now. So, stable at the low level.

And Asia, mainly affected by the developments in the Chinese markets where we have seen some significant weakness during the quarter. And that’s sort of a bit of mix picture in the other regions of Asia, where actually India saw some slight growth and Japan has also had a fairly solid performance.

Looking at the sectors, Automotive, and oil and gas were stick outs in the positive – sorry, automotive and aerospace stick out in the positive direction, while oil and gas is a weak market driven by the weakening we’ve seen in the oil prices. Given this weak macroeconomic environment that we see in the world around us with a bit slower GDP growth in most of the worlds, it’s of course very important that we have a strong product program, so we’ve have a strong offering to reach out to our customers and that we can drive and support our organic developments in the markets.

And therefore of course, it’s really exciting and positive that we have a record year when it comes to product launches in the Sandvik Group this year. All our efforts within research and developments preceding years have started to bear fruit in 2014 and are now really gaining momentum into 2015.

Looking down at the various markets, I mentioned most of this already than North America, somewhat negative trend compared to the preceding year as well for Asia we see this negative trend. Europe stable, some positive signs in the western part and even though they are smaller regions that Sandvik is quite encouraging to see that both Africa and Australia do see quite positive growth especially when it comes to order intake for the business.

So there we have been successful in booking new orders and mainly relating to our mining business. Looking down at this pie chart, we do have various segments.

The biggest change in here from preceding quarters and we’ve had quite a few quarters with the orange color for mining. We can see that mining has flattened out and it’s very close to zero level when it comes to organic growth.

So we are seem to clearly seeing even year-on-year some stabilization now in the mining markets and the mining market continues to develop flat in line with the levels that we are seeing right now. Construction is negative and as well also the energy sector obviously driven by what we do see with the weakness in the oil and gas markets.

Looking at the demand trends, we continue to see, I would say strong positive developments in the aerospace area and the main area where we see continued negative trend into the second quarter is in the energy sector again driven by the weak oil and gas prices. Looking at the numbers totally for the Group, order intake came in at 22.7 billion Swedish Kroner, the negative change by 4% in total for the Group.

What is positive and encouraging is that we have a neutral book-to-bill for the mining business and actually despite the large order we took within mining systems, mining systems is below average when it comes to book-to-bill. So it’s weighing down.

So the development when it comes to aftermarket and equipment was after above this neutral book-to-bill. So, reasonably stable and good market developments for the equipment and aftermarket sides of the mining business.

We continue to see challenging developments in the oil and gas industry and that is one of the main driving factors obviously for the decrease in order intake that we are seeing for the company. And sequentially, this was a decline of 2% compared to the preceding quarter.

Invoicing came in at 23.4 billion Swedish Kroner, which was in that change within price volume terms of 5% negative then. And we really see negative organic growth across all BAs driven by the weaker market conditions that we are seeing.

But mining, then these comparable numbers are getting quite small in mining to only minus 2% in price volume terms compared to the preceding year. So clearly stabilization in the mining markets from the long period of time a decline I presume.

EBIT 2.9 billion Swedish Kroner. We see quite a strong year-on-year earnings growth.

Obviously, currency is effect – the largest effect that we have on our EBIT in the quarter, but also then the good positive effects when it comes from – coming from our savings programs and Mats would touch a bit more on the details for business that are how this is coming through in the company. And cash flow, strong cash flow based on good net working capital management, but also good discipline when it comes to our capital expenditures in the company and we actually revised our guidance down somewhat for the full year when it comes to capital expenditures in the Group from being below SEK5 billion to be about SEK4.5 billion in the updated guidance now in conjunction with this quarter report.

Comparing to our financial targets, well, we have reasonably strong growth on our top-line, but this is obviously a currency effect that we are seeing now that’s driving this organic growth. This is total absolute growth that we are seeing in the company.

We continue to focus on developing our market positions and to support organic growth, obviously developing our offering to our customers to really make sure that we have these best solutions out there in the markets is absolutely key and, as said earlier, we have a record high number of product launches which will really support what we can offer our customers and enhance our abilities to develop positively in the market. Return on capital employed it’s 12%, while we need to continue to focus on reducing our net working capital and then restoring earnings in several parts of the company if we are going to get up to our target, long-term target of 25% of return on capital.

And we have programs in all of these areas which we are driving with full force through the company. Net debt-to-equity increased somewhat and the main reason for that was obviously the dividend payment that we did in this quarter.

Cash flow, as I said earlier was very strong so that’s counteracting that somewhat in the company. And the dividend was paid out and we continue to have a very high dividend payout ratio in the company and as said earlier, Sandvik has had an uninterrupted dividend since 1870 and based on the strong cash flows we have and the good developments in terms of our results we see that we can continue to support a strong dividend payment to our shareholders.

This slide we normally show every quarter summarizing the main activities that we see in each business area around the company. And to highlight some of the areas where we made progress in this specific quarter, well, first within Machining Solutions about the increasing the pace of product launches, the first wave of the large product launches was in April this year, the second one will be this autumn.

So we are making good progress with enhancing our product program driving our – up our new sales ratio in the company to levels where they should be. And we continue to restructure our manufacturing footprints to create a leaner, more efficient company.

Mining is also consolidating its manufacturing footprints and continuing that process. We concluded the negotiations with our unions at our Turku sites in Finland and are now progressing with the execution of that closure and the transfers to other sites.

And we also initiated the closure of a new site within mining in the quarter. And we have a continued strong focus in growing and developing our aftermarket business which is obviously the greatest opportunity that we have in this kind of market environment that we are seeing right now.

Materials Technology, the main highlight there is that we had good discipline regarding the build-up of inventories are avoided those in the second quarter ahead of the summer shutdown and we will continue to focus on our net working capital efficiency in that business area. And construction, I would really like to lift up as a highlight they’ve done an excellent job in improving their margins, have a good really, really leverage in the quarter.

The cost savings of delivering the fact that we effect and we see a strong development and construction is actually somewhat ahead when it comes to the savings targets that they gave, you might saw there at our Capital Markets Day so far this year. So, good progression despite facing a very, very tough market in the world around that.

So with that, I’ll hand over to Mats to make some comments more about the financial numbers and then I’ll come back and wrap up the presentation.

Thank you, Olof. I will give second quarter highlights in some of our key areas and starting with the development of net working capital.

In absolute value, we reduced our net working capital with some SEK400 million in the quarter. But that was fully due to currency effects.

Looking on the volumes, we actually managed to keep it flat from the first quarter which is despite the seasonality we normally have when we are building net working capital in front of the holiday season now in the third quarter. Looking specifically on inventories, we manage to keep it flat in the quarter.

So we didn’t have any significant under over absorption for any of the business areas looking on the second quarter. However, it is important to remember that we have the stock built-up lost during two out of five business areas and that is Materials Technology and Machining Solutions.

I think it’s important to recognize that when you are making kind of a bridge analysis year-on-year. Looking on the relative development of net working capital, we have managed to sustain the level we reached in the fourth quarter to an 8% developing net working capital, which I think is a good development considering the normal seasonality that we see in the first quarter, second quarter and third quarter with the net working capital build up.

Looking into the third quarter, you can expect destocking in all business areas and we are actually aiming for sustaining the relative net working capital at 28% also into the third quarter, which I think will give a good base for reaching our long-term target to 25% and going forward. So all in all, I would say a good development in terms of net working capital.

Moving over to our savings programs. We have communicated savings of totally SEK1.9 billion with full run rate end 2016, whereof we have for supply chain optimization, SEK1.4 billion, the first phase SEK800 million with full run rate this year, we had the second phase with SEK600 million with full run rate end 2016.

And we achieved some SEK500 million in full run rate end of second quarter and all of that is related to the first phase of the supply chain optimization program. So I would say that we are well on track when it comes to reaching the SEK800 million by the end of this year.

We have also announced the adjustment of the current cost base to hopefully about SEK500 million with full run rate, annual run rate end 2016. We actually achieved SEK160 million with run rate – with annualized run rate in the second quarter.

And in total, from all the savings program we are now on the level of SEK660 million when it comes to annualized run rate. So all the ongoing cost savings program is actually running according to plan.

Finally, a couple of words about the guidance, but mainly starting with some comments on the currency effect of the second quarter. We had a positive currency effects of SEK775 million in the second quarter, which is somewhat lower than the original estimate we had of SEK900 million for the second quarter.

But that difference is fully due to a strengthening of the SEK against US dollar and the Chinese Yen during the quarter which made the currency impact somewhat lower than estimated. Looking into the third quarter in terms of guidance, we are estimating the currency effect of plus 500 in the second quarter and that is based on the closing rates of currencies end of June.

In terms of the metal price effects, we are estimating that one to minus 100 million in the third quarter and that is also based on closing rates end June both for metals as well as currencies though. And looking on the full year guidance, we are, as Olof said, we are changing our guidance when it comes to our capital expenditures for the full year to 4.5 – about SEK4.5 billion compared to below SEK5 billion in the previous estimate.

When it comes to net financial item as well as the tax rate we are keeping the previous guidance in that area. So with that, I’ll leave for Olof to summarize.

Thank you, Mats. So, looking forward into the future beyond the specific quarter here then, we continue to have a year here with a record number of product launches and that’s of course the key thing to support especially Sandvik Engineering Solutions growth and development going forward that we get this upgrade in the product range here.

But also, I would say the good developments that we’ve had in Sandvik Mining regarding sales in many areas are a lot supported by new products that we have introduced during last year into the markets that are now gaining momentum and generating sales to customers around us – around the world. The aftermarket continues to be a key focus area in this environment where the capital expenditure rates are very low in the mining sector.

And we are looking at continuously very innovative ways to try to go to the market there, support our customers and create attractive solutions and options for them in the aftermarket. So, we have both, as I’ve showed previously repair kits where you get the full kit needed for certain rebuilds in a structured way as far new order item from us.

But we are also looking at kits where we can do certain performance enhancements on, for example rock drills when you do the maintenance on – or the big more major rebuilds on these kinds of pieces of equipment. So that makes it an even more attractive proposition for our customers if we can offer those kind of improvements.

And we are also looking at price per hour maintenance options. Obviously, our customers are under a lot of pressure to find cost savings and improvements and we need to find ways to support them in a good way and help them to achieve those savings.

But at the same time, protect and develop Sandvik’s business and our margins. And then we are building a leaner company and this is of course especially important in this more weak market environment with quite slow global GDP rates, growth rates that we see around us.

We have a strong focus on our cost efficiency programs and make sure that we continuously improve the productivity in the company going forward. So to summarize the second quarter then, we had a very strong cash flow for the second quarter.

So, I think that’s something we can be proud of in the company. We had earnings growth.

A lot of that was currency, but we can be happy with the progress on our cost savings measures. The market is soft and obviously we have negative growth in terms of price volume terms.

But we are doing what we can and we have a lot of new products coming out into the markets that continue to support our position in the markets and our organic growth rates going forward by a very strong and updated offering to our customers. So with that, Ann, I suggest that we open up for questions.

Yes, we do and we have possibility to ask questions here in the conference room but also from the telephone lines. So we see if there are any questions from the telephone lines to start with please, operator.

Hi, good morning everyone. Good morning, Olof, Mats, Ann-Sofie.

Just wanted to ask a couple of questions regarding, first SMT, regarding the second half of 2015, obviously you face tough comps in terms of revenue growth and obviously margins as well as especially in the 3Q last year and I was wondering you guide us as to how to forecast under absorption if any or underlying drop through or flow to margins, just to get an idea of how you are going to perform in SMT towards the second half of 2015? Thank you.

In the third quarter, we normally have a drop in EBIT margin of – in the range of 3% to 4%. We will have a normal seasonality in SMT, but then somewhat negatively enhanced by the weaker developments we see in the oil and gas sector.

So you should assuming something towards upper-end of that range looking at the third quarter this year.

And then a second regarding construction, when you look at North America and Australia, it was a great performance and there is no large orders. So, I wanted to get some color on how your business is doing there, why is it growing so much?

Thank you.

Well, North America, I would say, generally good development for us in the market and actually mobile crushers which has been a problem area for us had some – had a fairly good sales development in the quarter in North America. Looking at Australia, we did actually have one larger contract doesn’t qualify as a major order from a Sandvik perspective, but in terms of crushers to a specific customer in Australia, but then we have also a general good activity level.

And looking into Q3, I would say, Australia is maybe the region where we see the most attractive opportunities right now where we are negotiating several large possible contracts coming now into the third quarter.

Thank you. I’ll stand back in line.

Thank you.

And we have one question here in the room please. Anders?

Yes, Anders Roslund with Swedbank. Regarding Machining Solutions how do the short-term outlook look in Europe, US, and Asia?

Well, as we said, I mean, Europe, we have seen fairly stable developments in the second quarter. Some signs of strength in the western parts of Europe and that’s mainly driven by, I would say the aerospace and automotive segments that are been stronger.

North America did weaken compared to last year, but we have not seen any negative trends, a quite a stable level there. And I would say also fairly stable level where we are at in Asia as well.

So looking at the insert sales for that – what that’s worth the first couple of weeks, some appeared here, we see a stable level at the rate that we have seen during – the activity levels we have seen in Q2 going into Q3 here.

Okay, thank you.

Okay, then operator, we’ll continue with a question from the telephone conference please.

Yes, good morning. One question on machining solutions and net working capital has gone up.

And I was just wondering if you are entering Q3 with a bit too much inventory for that division and what does it mean for the margin in Q3, margin outlook in Q3? I will have a follow-up question.

No, I don’t think we are kind of over stocked when it comes to machining solutions going into the third quarter. And in terms of the under absorption in the third quarter, I think you can assume the same pattern as we saw last year in terms of the margin impact between the second and third quarters.

So, as good control as previous year, I would say.

Okay, and a follow-up on machining solutions, the currency impact was much lower than expected in Q2 than I expected. Whether any particular reason, whether a reclassification between the copper white line and machining solution?

No, not at all. I mean, we had some difference in flows in the second quarter and secondly, when we are looking on the development of the US dollar in particular throughout the quarter, it’s the highest impact I would say on machining solutions.

So, a little bit or a difference in flow, but no kind of reclassifications, no.

Okay, thank you.

And do we have the next question from the telephone conference please, operator?

Yes, good morning. My question is on Machining Solutions and the growth profile.

The global industrial production was up about 2.5% year-on-year in the first half of this year and your business was down 2.5% despite the product introductions. Could you maybe breakdown the performance as you see it relative to market share and market growth and while this due to some destocking in the channel that may drive down your sales which historically have been more correlated with IP than we have seen in the recent periods?

Thank you.

I mean, we may look at what’s available in terms of market share data, we do not believe that we’ve had any market share losses in the business and I would say also that the new product introductions unfortunately in terms of sales during Q2 have had very limited impact with the first wave of those introductions, which really came in April, and it does take some time until they build momentum, but obviously, our customers are planning their inventories up and down and if they lower their production rates to that inventories, then that has obviously very direct effect on Sandvik Machining Solutions.

Thank you.

We also see the same pattern across all our three brands in markets. So, you cannot say that, I mean, we are losing share on one of the brands or some and then we have a very, very broad market exposure in the business.

So, this sits in line with the activity levels that you’ve seen in the sectors that we are touching with machining solutions, the production, obviously, production rates in these sectors.

Thank you.

Okay, thank you and we’ll go to the next question please operator.

Yes, good morning, Olof, Mats, and Ann-Sofie. I have lot of questions, so I get back in line after my usual two ones.

My first one regard the drop through in the SMS business. It’s quite big drop through and you mentioned that you have not sort of punished that much on the margin on the net working capital on that specific division.

How should we see that going forward drop through? Is that negatively effective or I’ll say you close by the start of the product launch, well, could you please elaborate a bit about the drop through?

Yes, I mean, obviously, minus 72% leverage is not what we would normally expect to see, it’s very much an eye in there. Important and we have been planning and driving for a stronger development in the economy around us and what we actually seen in the quarter.

So there is a need to look at tighter cost control in the business area based on the organic growth rates that we are seeing right now. And to a certain extent I mean, the product launches have had some impact, but not major and we are obviously not happy with the minus 72% in the machining solutions for the quarter.

That’s very clear. Could I also ask you a general question on price and mix for the Group?

I know that you’ve taken to some from the communication, but for the Group, and maybe a bit on the business areas, especially, I would say mix in SMS and the pure price contribution in mining would be nice to hear about?

For the Group, we had about 1% positive net price change and four out of five business areas had a positive price development. The exception is Sandvik Venture where we actually saw some deterioration of prices based on what’s happening mainly in the oil and gas sector here.

So, mining and SMS were in positive territory. Obviously, the mining market is very tough and it’s only very small price - positive price development, so that we can achieve there.

But it’s still in positive territory and I’ll say, construction maybe say neutral development to slightly, slightly positive.

That’s great. Just two quick ones, sorry, Mats, the savings of 162, should I add to that the sort of other savings that we debated last year in the US about HR, IT outsourcing, all of that?

Is this pure savings from sort of the scope programs?

It’s pure from the scope programs, yes.

Yes, thank you. I’ll get back in line.

Thank you operator, you can put through the next question please.

Hi, good morning gentlemen. Hi, Ann-Sofie, thank you for taking my call.

I had two questions please. One, I just wondered whether you could talk about the impact of the oil and gas slowdown on SMS?

I know you talk about it or refer to it in the text in the report. And I just wonder whether you could perhaps try and give us an indication of how much of an impact it’s having on general – the general engineering segment?

And then the second question related to oil and gas…

That one with oil and gas, I mean, obviously one of the main drivers for weakness in North America is oil and gas sector and as you say, our direct exposure is quite small to oil and gas from a SMS perspective. But a lot of our customers that we classify as general engineering are supplying products that then end up are driven by the oil and gas sector.

Exactly what percentage that is, is of course very difficult for us to calculate exactly. It would be an enormous work to do that, but clearly, that has been one driver for the weakness at SMS as seen in the second quarter in North America.

Okay, thank you. And just on, I guess, the second question on oil and gas, I wondered if you can perhaps quantify how much of a drop you’ve seen in Varel and whether you can give us an indication of the target savings you have for the restructuring actions you initiated there?

Well, we don’t specifically talk about results sub – the segments that we report in our report. But we quite taken – I mean the drop has been quite significant for Varel due to especially the lower activity in North America that we have seen.

We are taking a lot of measures to address the situation in the markets downsizing our personnel for low programs, other cost saving initiatives and you can see that impart in the operating leverage for venture which actually is fairly good for the quarter here. So, a lot of activities going on there.

But we – I have not chosen not to quantify on more specifically on our business area level in the company.

Okay, thank you.

Thank you. Do we have any questions here from the Stockholm?

No, in that case, we continue with the conference call, please. Could you put the next question through please, operator?

Yes, good morning. Thanks for taking my call.

The question really was about machining solutions and just this market share issue. We can only look at another company kind of how looks like you are doing slightly better than originally and now one wonders you know what is the general market share position that we can look at for that division?

And what are you specifically doing around solid carbide products in that area?

Well, to start with market share, I mean, we don’t lose market share over a couple of quarters across three brands in the company. So, when I look at say, Seco, Coromant, Walter, et cetera, specific performance, you can see the same trends across all the different brands.

So, I feel confident in saying that we are not losing any market share in that business. When it comes to solid carbide products, say apart now what used to be hard materials now called Sandvik Hyperion and which is a part of venture event.

So they are reported in that part of the business within the Sandvik Group.

Is it likely to remain, I mean, is that not a substitute product for the traditional SMS areas?

Okay, I interpreted, I mean, all are inserts more or less that we produce and sell in Sandvik are within in SMS or solid carbide.

Okay.

Then you have also high-speed steel to certain applications, but that’s a minor, minor part of the business. So, solid carbide is a base of the material that we use across the very, very vast majority of SMS business.

But then we also make larger and other items in solid carbide and that’s how I interpreted your question there. Pieces for drill bits, die for cutters, dies for wire drawing in the steel industry, et cetera.

And that business is part of the Sandvik Hyperion and in the venture. So that’s the metal cutting part here that I would refer to.

Okay. Thanks very much for taking that up.

And also just with the new Chairman, Molin arrived, what meetings have you had with him? And how do you think he will differ with his view of the company compared to the previous Chair?

Well, I mean, it’s only days, Johan has just started, but he is really engaging with full energy into the company. We are running an introduction program for us throughout Sandvik for him.

He is meeting our business areas, looking at our strategy. We only had one board meeting so far.

But I think Johan brings with him a fantastic industrial experience and a lot of good thoughts on how we can continue to improve Sandvik going forward.

Okay. Thank you.

Okay. Thank you.

And I believe one further question from the telephone conference please, operator.

Yes, thank you for taking my question. You mentioned Olof, the importance of driving the aftermarket in mining and you gave us some concrete examples how.

Could you please share with us some empiric evidence? You normally help us with sales mix for that specific division.

So just to give us the mix of…

The mix was 59% aftermarket in the quarter, 21% equipment and 20% mining systems in Q2 for the Group, or for the mining business area.

Yes, that’s fair. And then on my previous price question, positive for mining, if you look at the aftermarket in per se, is that positive also, is it more or less than the – for the division as a whole?

It is positive, but we are seeing, I mean, it has an enormous price pressure from the mining companies on the aftermarket business and I would say, it’s very strong in the rock tools business which is tough – has a tougher pricing environment on the parts and service part of the business is what we are experiencing right now.

That’s very clear. Could I also ask on the, let’s move to Mats, though, on the FX, there seems to be quite big positive on the Group to get to the SEK775 total and how are you thinking about after when you go ahead for the third quarter?

And now then it’s the one we talk about a one-off structure effect on FX, so 270 a little bit over which I guess, eight is to the nickel, what’s the rest is that profits coming out of the divestments or what’s the rest there? Thank you.

Starting with the currencies, I mean, when you are talking about that kind of effect, it’s a bridge effect between the years. And we had a rather negative impact last year in the second quarter when it comes to Group common related to the strategic hedge.

There is much less looking on the second quarter this year. So that is more of a kind of a bridge effect.

I am not anticipating any kind of big effects on Group going into the second quarter when it comes to currencies.

That’s clear.

And the second one, can you repeat that one, please?

That’s the – on the bridge for SMT, the structure in one-off sort of factor is minus 260 on top-line and minus 270 on the EBIT. Could you please give us the component on the EBIT there?

I guess, nickel is one of them, but what’s the rest?

I mean, we are talking about the divestments also, I guess, of the distribution business and so forth in the fourth quarter. What I think, looking on the bridge and specifically looking on Materials Technology, it’s also important to remember over absorption in the second quarter 2014, because I think we had an effect of approx 70 million, meaning 2% on the 2% units on the EBIT margin in the second quarter last year and that also has an effect when you are looking year-on-year in terms of a bridge effect.

But that, you can’t call a structured one-off is to be in the organic rate?

No it’s not.

It’s not an organic one.

It’s inorganic, but I think it’s important to remember that when it comes to structure the divestment.

So you care for them. The EBIT year-on-year bridge are minus 270, it is nickel, rest is divestment more or less.

Yes.

Okay, thank you.

Thank you. Do we have any final questions?

Yes, we do. Here in the front.

Thank you.

Yes, Anders Roslund again. A little bit about the structural measures in construction seems to be going very well.

So you stick your own target of reaching 6%, 8% at the end of the year and in mining, will we look for 2016 before seeing margins coming up for, is it trend we will see also in this year?

Mining has come up a lot since last year. So, I mean, mining is I think, sequentially, mining sequentially has slight negative currency effects, some things moving between quarters, but mining is stepping up and if you look at the bridge on the operating leverage they are actually up SEK80 million on profits and despite on the line down 150 on the top-line.

So, mining is transforming itself. I feel very happy with the progression that we are seeing in mining and said in the aftermarket a lot of good things are happening and we are driving that with full force.

And on the equipment side, we are upgrading our product portfolio. We are driving sales hard here.

So, there I think we also have a good development both, growing the market and taking out costs and creating efficiencies. Construction, well, rounded they are actually at 7% if you go with one-digit, we said 7% to 8% in the Capital Markets Day last year.

So construction doing well. They are exceeding their cost reduction targets.

We really need top clients to really get that business performing well, but we are going to continue to drive hard and I think DG and his team are doing a really good job and what was a very challenging starting point with the construction and they have not had any help in the markets in terms of market recovery to achieve the performance improvements they’ve got sizing and they’ve done an excellent job there.

Okay, thanks.

Thank you and that said, there are no further questions. So, we conclude this session and we wish you good summer and a happy holiday when you get one.

Thank you.

Thanks very much everybody.

Thank you.

Thank you.