Sandvik AB (publ)

Hello everyone and a warm welcome to Sandvik's Presentation of the First Quarter Results 2021. My name is Louise Tjeder, Head of Investor Relations.

And beside me, we have our CEO, Stefan Widing; and CFO, Tomas Eliasson. We will as usual start with a presentation where Stefan and Tomas will take you through the highlights of this quarter.

And then we move on to the Q&A session. And here you can ask your questions on the conference call or online in return.

And with this, its time to kick-off the presentation. And over to you, Stefan.

Thank you, Louise. And welcome also from my side to Sandvik's first quarter report in 2021.

I will come back to a version of the picture you see in front of you here right now. This is our Top Hammer XL surface drill system based on the Pantera DP1600i rig that we launched in the quarter, and it is one of the contributing factors to that - our surface drilling division had an all-time high order intake in the quarter.

But let's start with the big picture, we have a positive momentum in the business with a broad based improvement across most of our segments. We had a very strong order intake of plus 12% versus last year.

We see a positive momentum in both the mining and construction segments, which are at a record high water intake in this quarter. We also see continued improvement in our short-cycle segments driven by automotive and general engineering in particular, but also several of the short-cycle businesses in SMT.

Demand in aerospace and energy segments continue to be low, but we started to see some signs of improvements in oil and gas towards the latter half of the quarter. We also delivered a strong earnings in this quarter, adjusted operating profit margin of 19.2% versus 15.8% last year.

Our rolling 12 months EBIT margin is at 17.6% versus 17.9% in the same period of last year. So this means that after 12 months of COVID, we have an average margin that is almost the same as the 12 months prior to COVID.

And that is something we are very proud of in the company. Of course, this is supported by good savings.

And Tomas will talk more about that in his part of the presentation. This is also the first quarter that we present Sandvik Rock Processing Solutions and Sandvik Mining and Rock Solutions at two separate BAs.

It's been a huge effort by the team to make that happen, make the separation, while also keeping focused on customers in a time of record high order intake, but they have done that in a very good way. So we are happy that we have done that now.

In this quarter, we have also launched a new company purpose and an updated strategy for 2025. So we continue also to focus on long term improvements for the group.

If you follow us closely, you have most likely already seen our updated strategy, it is in the annual report. You can also find quite a lot of material on our website, [email protected].

We have a new purpose, as you see in the middle of this circle, we make the shift advancing the world through engineering. We have reinforced our core values, customer focus, innovation, fair play and passion to win.

And we have added or refined six strategic objectives in the outer circle that the whole group will focus on going forward. We have three foundational transformational shift, shift to growth, the digital shift and sustainability shift.

We have three more foundational objectives related to be the employer of choice, our customer’s first choice and to be agile through the cycle. For each of these, we have also defined concrete targets where we aim to be in 2025, to ensure that we drive also good strategy execution.

I talked about the Top Hammer XL, which is a new product we launched in the quarter. Here, we are essentially taking the top hammer drilling technology and make sure that it can be used also for larger hole diameters where you usually in the past and have had to use down the hole drilling.

This means higher efficiency up to 50%, better fuel efficiency and up to 20% higher productivity. So a really great innovation from the surface drilling team here.

And it's not only the new drill rig, it's also new rock drill and the new rock tools that goes with it. So something we look forward to see what it can do in the market going forward.

The start in Q1 has been encouraging. Looking then at the market development and starting with our main regions, Europe minus 1 and North America plus 5.

These numbers would have been plus 5 and plus 7 if we take away the major orders we had in SMT oil and gas last year. So the underlying development shows a strong momentum here.

Asia plus 26%. Here China is plus 23, and for SMS China is plus 11.

And last year China was minus 1 for SMS, they were not that much impacted by COVID in the quarter as a whole, so strong underlying performance there in China, and then the rest of the region so very much driven by the high order intake in the mining side. Looking at the segment's, strong year-over-year improvement in mining, clearly, General engineering are now back at the same level, may be slightly above last year, which we are happy with also here we were not that much impacted by COVID in Q1 of last year.

So this is positive. Automotive is strong, continued sequential improvement and high single digit improvement versus last year, so strong underlying demand there.

Energy as I said, still at a low level versus last year. We started to see towards the second half of the quarter increased customer activity on the oil and gas side and we booked a few smaller orders on the umbilical side also towards the end of the quarter.

So we see things picking up there, promising signs. Construction, strong order intake in the quarter, but the underlying demand we still consider to be more or less on par with last year, where we had some impact coming from COVID.

Aerospace, again, not much of a improvement, I would say it's the only segment now where we're still waiting for things to start to pick up. We see promising data from customers and travel, but it's not yet visible in our order books.

And this also translates to why some specific countries are maybe a little bit weaker. Sequentially mining continues at a very high level, engineering, general engineering is going up versus Q4.

Automotive continues to strengthen versus Q4, energy and aerospace as I said staying at a fairly low level down and construction improving. From a regional perspective, all regions are improving sequentially versus Q4.

Order intake then plus 12% close to SEK 26 billion in the quarter. Revenues trailing a little bit at plus 1, but obviously looking forward to converting that order intake also into sales here going forward.

EBIT development strong, almost SEK 4.2 billion in the quarter, plus 12% operating profit year-over-year, a margin of 19.2%, would have been 18.7% versus 16.6% if we exclude metal prices in SMT. We have a headwind from currency of around 30 basis points in this.

But yeah, a very strong operating leverage based on just how the math plays out here. Good savings and again good rolling 12 months level.

Going now into the various business areas and starting with Mining and Rock Solutions. Order intake up 36% year-over-year, to an all-time high level.

We had several divisions Load and Haul, Underground, and Surface drilling that are all at an all-time high level. And we also booked some larger orders in the quarter.

You should note that we have lowered the limit for what we call a major order from SEK 400 to SEK 200 million. So it might show up a little bit more frequently on this list going forward.

Revenues trailing a bit, of course, there are lead times in this business to translate the order in take into revenues, but still up 18% [ph] and strong margin of 20.5% in a quarter that is seasonally traditionally weaker for Mining Rock Solutions. So this is an all-time high margin for Q1 for then.

Then, we have of course DSI - the DSI acquisition is progressing, we have received some good regulatory approvals in the quarter, the process is moving ahead, might close end of Q2, might also slip into Q3, but sometime around mid-year we'd expect it to close. Sandvik Rock Processing Solutions, I mean, really happy the first time we report this externally.

They have a fantastic quarter order intake up 28%, revenues up 19%, profit up 36%. A seasonally typically weak Q1 and they still deliver 16.4% EBIT margin, which is very good I think.

Here the order intake is split into both strong equipment and strong aftermarket, aftermarket up 22% is partly improved then by catch up effects from last year. We can see in the mix that is the high portion of spare parts, which indicates that some customers were running the equipment may be a little bit longer.

We also see on some - in some of the businesses like and on the mobile side or customers placing larger orders to secure deliveries in the future, since we have had very strong order intake in some of those businesses. The strong margin is of course driven by the revenue increase, but also that they had an A&S spend that is maybe slightly lower than we expect them to have going forward.

Shifting to Manufacturing and Machining Solutions, happy to see that they are back on par with last year. On the order side revenues are trailing a little bit as we have seen in the past quarters, which is normal in an upturn.

If we dissect the order intake a little bit, we also have a strong order intake in Wolfram, the powder business which is a very good leading indicator. Wolfram is helping the order intake with about 200 basis points.

On the other hand, we have a similar negative impact from working days. So the underlying order intake rate for the quarter is flat if we compensate for both of those factors.

Really happy with the margin here 22.9% despite a 3% drop on the top line, a good impact from structural savings programs here. Also, here we are launching new products.

I'm happy with the first product we are launching with what we call the data matrix. Here we are put a QR code that is unique on each insert.

So we can track and trace each individual insert in the production facility, which is important in, for example aerospace. We can also attach specific data to each insert that will ultimately help also with productivity.

So it's the first launch, I am excited about what the technology will bring going forward. SMT finally, minus 13% on order and revenues, if we exclude the major orders in Q1 last year in oil and gas they are up 3%, excluding those.

I would say if we exclude then oil and gas and aerospace all of their other businesses see a strong momentum in industrial heating, consumer-related segments in strip application tubing and so on are all doing very well. Also happy with the margin 7.5%, if we exclude metal prices versus 9% last year.

Some of you asked from time to time what SMT would do without umbilicals? We can say that invoicing from umbilicals has been very low in the quarter.

So this is - this is a good answer to that question. As I also mentioned, we did see activity picking up in oil and gas towards the end of the quarter.

Pipeline is growing, we took some first smaller orders, when this will translate into a more noticeable improvement that remains to be seen, but at least we see activity levels picking up. The process for the listing is continuing, according to plan, a big workload for the team to conclude on those activities, but we are progressing according to plan, which is to proceed with the listing done in 2022, as previously communicated.

I will come back at the end. I'll now hand over to Tomas for a while.

Thank you, Stefan. So let's jump into the numbers and start with the financial summary.

As usual, if you look at the upper right hand corner, you can see the components of the growth, everything included, 12% organically for orders and 1% organically for revenues. We have quite a heavy headwind when it comes to currency, so minus 9 for both, giving a total growth of plus 2% for orders and minus 8 for revenues.

If we then walk down the income statement, the operating earnings adjusted 12% up, SEK 4.2 billion and really nice margin improvement from 15.8 to 19.2. The financial, net financial items came down, we'll come back to a specification on that.

Tax rate also looking good, but we'll come back to a specification on that. Working capital below 25%.

So let's start with the margin, and look at the bridge here. And, of course, the - we start with the organic development, price, volume, productivity, the leverage looks little bit off, plus 288%.

But - I mean, the top line number is very low, plus SEK 227 million, that's 1%, and then earnings up SEK 654 million, that gives you a leverage of 288%. Now the question here is what is behind this development apart from a good operational efficiency and financial performance?

Well, it's the savings of course, the savings programs. So let's go immediately to that analysis here now.

And here we have an update of all the savings programs, same format, as you have seen over the last four quarters. And we can see here that we have both permanent savings, that's the first section and we have temporary savings, that's the second section.

And the way this works is that on the permanent side, we have the program from mid-2019, which is still giving a tail of year-over-year effects, a total of SEK 70 million in this quarter. Then we have the new program that we have worked on through where all of 2020 volume related and structure related savings programs that gave SEK 125 million, together close to SEK 200 million.

Then on the temporary savings, as you might recall, we've had like SEK 500 million, SEK 600 millions on both work time reduction and other temporary savings, which is basically discretionary spending. Work time, short term working weeks or work time reduction came down in the fourth quarter as many of our businesses went back to full time.

And this time, you can see that work time reduction has gone down to 60. It's mainly part of SMM and mainly in Germany which is still on short term working weeks.

The discretionary spend is just below SEK 300 million. So that is coming down as well.

Some traveling has increased or started mainly within the countries, within the big countries like Canada and the US and Australia and so on. International travel is still restricted, so all in all SEK 550 million in the quarter.

And the game plan for this has always been that in 2021 temporary savings will go down and they are coming down, as volumes are picking up and they will be partially replaced by temporary savings, especially the program from 2020 will continue to increase in speed during the year and then in between, we have a business cycle recovery. So those are the three buckets on the road going forward.

So let's move on, and look at the finance net. Look at the first line here, which is the important one here, the interest net is SEK 90 million compared to SEK 126 a year ago.

We have a lower debt, we have paid back some of their bonds during the year. So we're looking good.

The guidance here is below SEK 400 million for the full year, we have that insight. The tax rate, we have guided 22% to 24%.

We came in on 20.7% in the quarter, excluding items affecting comparability, it was a capital gain, which we took out from adjusted earnings. But we have an accounting correction in the quarter as well on the tax side.

So if you adjust for that, we have a normalized tax rate of 22.4%. So we're still within the range.

Moving forward, we can say that we don't foresee any changes really in the range. So this is probably the bottom of where the tax rate will be.

It has come down from 27% 28% 5 years ago now to these levels here. And this is what we see, unless something happens, unless some big countries will start to increase income tax rates for corporations.

But we don't know anything about that right now. Going over to the balance sheet.

Working capital, of course, working capital is lower than a year ago. As you can see in the graph on the left hand side, given - driven by the volume reduction, or the volume decline during 2020, but sequentially it is picking up and of course as order intake picks up and the activity level goes up, working capital will go up as well.

You can see on the right hand side, that three of the four business areas have a higher relative number, of course, building up for deliveries in the second quarter and during the summer. However, SMM as you can see is actually going down in relative numbers, but that's not intentional.

We need to build inventories in SMM as well to secure stock availability as well. It's just that the sales was bit better than we had planned for.

So product production didn't keep up really. Okay.

Next slide. The cash flow, cash flow came in good.

If we look at the right hand side here 4.9 - sorry SEK 2.9 billion in the quarter compared to SEK 3.2 a year ago. And of course, as we are now in a business cycle recovery, we will see impacts here from working capital going forward, but I mean, we will still have a good cash flow.

The net debt then, where this good cash flow continues to improve we are in net cash position including pensions and leases. The gearing is negative 0.02.

If you take out pensions and leases, we are - we have a financial net cash position of SEK 10.7 billion. Right.

Let's look at some of the guidance. Look at underlying currency effects.

We guided for SEK 750 million negative, we came in at minus SEK 789. So basically spot on.

This is translation and transaction effects. Then if you add the revaluation differences here in a bridge, which ended at minus SEK 483.

And this is mainly due to a big negative revaluation affecting Q1 a year ago, the in quarter revaluation effect in Q1 2021 was very limited. So this is just a reversal of that negative effect a year ago.

Metal prices guided for plus 60, we came in at plus 119, this is mainly driven by nickel. CapEx 0.8, interest net as you heard 0.1 and the underlying tax rate 20.7.

But bit more than 22, if you adjust for the accounting correction. Guidance for the second quarter 2021 and full year, we have not changed the CapEx guidance.

We still say below SEK 4 billion. Currency for the second quarter, just taking the exchange rate by the end of March 2021, w see mathematically that it will be SEK 350 million negative, but then you never know where the currencies will go.

But if you just use that those rates, this is what you get. Metal prices plus SEK 50 in the second quarter, and interest net, well, SEK 400 million or below as we said and the tax rates takes 22% to 24% And with that, I'll hand back to Stefan for summary and conclusions.

Thank you, Tomas. Yeah, so we - as we said, we see a positive momentum, and good growth in our mining and in the construction segments.

I mean, equipment orders up 88%, aftermarket up 9% and mining as an example is, I think shows the strength there. We see a gradual improvement also in the short-cycle businesses, they continue to improve sequentially.

Automotive now also in growth year-over-year, general engineering back at prior year levels. Solid results with significantly stronger margins, despite a revenue increase of 1%.

We also see underlying market conditions continuing to improve, I mean, commodity prices are at good level and the global industry production trends are also showing a positive trajectory. We do expect to have to manage some challenges on the supply chain side, we have not seen any impact from for example, semiconductor shortages in our business.

We will see what happens going forward. But at this point, we have not.

We expect our own supply chain to be a bit constrained, given the high order intake levels we see in some of the businesses, so it's something we will have to manage. So far, we have done it in a good way, I think.

We'll continue to focus on this operational efficiency and of course, continued agility to adopt to whatever happens here going forward. I'm also happy with - that we are not just focusing on the short term operational performance, we are also setting the scene for a continued sustainable growth journey.

We have launched a new purpose, a new updated strategy for 2025. We have the new group structure implemented.

We are proceeding with SMT, process aiming for 2022. We see good speed in terms of new innovations and product launches.

And there is a good organizational commitment to the strategic objectives we have launched, for example, our M&A agenda. So overall, I think we are positive with regard to the future.

Thank you for listening, and let's go to Q&A.

Thank you, Stefan and Tomas. So we will now open up the Q&A session.

So we can take the first question from the call. Please, operator?

Thank you. And good afternoon.

Just my first question was around the mining businesses and I wanted to understand a little bit more around the equipment orders. Do you think this was - mining companies coming back and replacing equipment that maybe they didn't do last year?

Or are you seeing a much larger sort of pickup in expansions and larger sort of Brownfield spending? And maybe as an extension of that, how should we think about this level of order intake when you think about your large order pipeline?

Is this level sustainable? Or does it feel like there was a bit of a catch up in the end markets in Q1?

If we start with sort of the type of projects, it's about 30% replacement, 45% Brownfield and the rest Greenfield. So that's how the mix is looking like.

I mean, if we have a record high order intake, as we had this quarter, I think, eventually the growth rates will come down of course, that's not sustainable. The CapEx guidance from both major and smaller mining companies that are relevant for us are positive going forward, both for ‘21 and ‘22.

But yeah, we expect a good order intake to continue, but not at the levels that we saw in this quarter in terms of, you know, 88% growth. That is not sustainable, I think.

Okay. Thank you.

And just my second question was around the strategy on Rock Processing, maybe now it's sort of standalone division. Could you just give us a feel for what - what in your mind the real sort of priorities for this division are?

Is it a sort of margin expansion story? Is it to really go out there and kind of capture growth and or do you potentially see sort of down the line this is something that you may think about sort of - its future in the context of the Sandvik portfolio?

Maybe if you could just talk about sort of what the priorities are for that division.

I mean, we're always looking for a little bit better margins. But I think when they are about 16%, they are about the level that their market is sort of supporting, doesn't mean that they cannot go a bit higher than that.

But I think then they are well performing, if we put it like that. We see this as an opportunity to add growth to the group.

It's not in our super big business, but it's sizable enough. If they can grow, as we have communicate to them faster than twice the pace of the market, we think it will be a good addition to the overall growth of the group.

Okay. Great.

Thank you.

Hi, thank you. Hi, Stefan.

Hi, Tomas. Two questions if I can.

One on SMS or SMM and one on cost savings. Just on SMM, Stefan you’ve seen strong sequential improvement, I guess low mid single digit in April versus the first quarter.

Normal seasonality, I think is roughly flat Q2 versus Q1. Can you talk a little bit about how sustainable you think that sequential development is, particularly in light of potential customer inventory restocking, in light of some supply chain disruption among your customers?

I guess US is your most indirect market. I'm curious what you see there, US or America - North America seems a bit soft to me still, of course, with weaker end markets, but I wonder what you're seeing from an inventory restocking standpoint?

Yeah. So let me comment on North America, I think it's a good observation.

I mean, it’s still for SMM then down in the high single digits in the quarter, but in March, it was up in the high single digit. So we saw a significant improvement in the US or North America in March.

So I think that was good to see, I think, because they have been lagging a little bit the rest of the world in terms of coming back. Now we know we have more oil and gas, we have more aerospace there.

But still, it was good to see them coming back in a good way in March. In terms of the beginning of April, I’ll just say, we have said it has started sequentially then towards Q1, low single up to mid single digit improvement.

I have said it before, and I'll say it again, please be very careful to draw too much conclusions from the first couple of weeks, especially this period. We have the Eastern moving a little bit back and forth.

And even if the numbers we give are compensated for that it is sort of daily rates. You know, it's still difficult to really nail down, you know what number you should put there.

This is the best guidance we can give for how April has started, with the data we have. We see, as we have said, not really an impact from the semiconductor shortages in our older intake, of course, we see that we have customers that have been impacted.

But so far, we don't see that. And I'm speculating now, but it might very well be as your also a little bit alluding to that, of course.

If you want to secure your supply chain going forward, you might keep the order level up a little bit when it comes to the cutting tools then. But that's what we can say at this point.

That's helpful color. Thank you.

And secondly to maybe more to Tomas, on the temporary savings Tomas, we are down from - was a little over SEK 700 millions in the fourth quarter, now at SEK 355, I wonder whether you can give us a bit of color on the quarters ahead. Particularly it's good in the two mining divisions, I guess, we are down to very small work time reductions here.

Presumably, that turns into overtime over the next few quarters. And more broadly for 2021, I wonder whether you can give us sort of a sense of a net number from a cost saving standpoint, as you see reverses of temporary cost savings, presumably either partly or completely offsetting the structural savings that are coming through in the SEK 1.3 billion program?

Well, I can try to put some color on it. I'm not sure I can give you all those numbers.

But if we look at the short term savings or the temporary savings, work time reduction will soon be gone. As you see in the table provided in the material, it's mainly SMM, which is doing that now and nothing on mining.

I mean, in mining stopped it already in Q4 or late Q3 last year when the orders - the order intake started to recover. But it will soon be gone for SMM as well.

Other temporary savings came down from SEK 500 to SEK 300 sequentially from Q4 to Q1. We don't have a specific guidance on that.

But there will be a substantial contribution from that. Also, moving forward until international travels opens up.

And we can start to travel freely and go to conferences and meet customers and do all of those things. But we don't have a number for it, et cetera.

But it will continue to be there for a while. Then if we look at the permanent savings programs, the new program that we launched, in a number of steps during 2020, the total full year run rate, annual run rate for that program is SEK 1.3 billion, and more than SEK 1 billion will hit the income statement during 2021.

And we had SEK 125 in the first quarter. So the rest you can basically spread out over Q2, Q3 and Q4 without giving any specifics, really.

But then, of course, it all depends. It's all dependent on how the business cycle recovery goes.

I mean, if we - if it continues, it will be like this, if it becomes a bit more troublesome, who knows, then we'll have to do more again. I think that's all the guidance that we can give on this.

Understood. Thank you both.

Thank you.

Hi, good morning. Thank you for taking my questions.

I want to ask on two things. The first one regarding, I think you've emphasized that the CMD a lot sort of more focused on moving SMM towards like metrology.

And we've seen a couple of companies announcing they are out there for sale, I guess we've seen a lot of other peers also flagging, they're interested in metrology. Can you give us maybe a little bit of an update on how your pipeline looks at the moment?

And whether you're seeing more competition for assets you're looking at? That's my first question.

And on the second question, I wanted to just quickly follow up on your commentary regarding the spin off SMT. And whether that would ultimately be conditional on any end market trends, or that's definitely set for middle of next year, no matter what happens in terms of end market development.

Thank you.

Thank you. I can start with SMT then.

I mean, we have a clear plan. And that is to proceed towards the listing in ’22.

Then we have caveated that with - that the circumstances need to be right at the time. We can just say that currently we don't see anything that shows that it would not be possible to do this in 2022.

I mean, we see the margin in Q1, it's even without oil and gas. This is I would say a performing stable company.

The caveat we have put in there is something we - there are certain points in time, maybe March, April last year or some months during the financial crisis, where clearly you would not want to list the company. So yeah, there are conditions for it.

But currently, I think we are on track to do the listing next year as we have planned, provided that the shareholders approve it of course. On metrology, yeah, I mean, it's an area that I think has been consolidated for quite some time, maybe over a decade.

So I don't think it's a surprise that there are other companies acquiring assets in this area. We - our strategy is built on that, that we want to connect certain solutions to machining and design and planning earlier in the machining process or the additive process.

We are not first time looking to become a broad generic metrology company. So yeah, I think we continue on the path we have said and at the moment, I don't see any obstacles to that, even though it's always going to be a competition for - when you do M&A.

Thank you.

Thank you.

Yes, hi. Thank you.

Just a couple of questions from my side as well. Firstly, on the mining business, obviously, very solid orders.

So in terms of, you know, looking ahead how is the pipeline looking. And in terms of - especially in terms of large orders, if you could sense, you know, whether you probably want to have similar kinds of large orders in the coming quarters as well or this quarter really is an exception.

And also, how about Greenfield trends, given the extent of spurred in the order momentum, do you think there is a good scope for some pickup in Greenfield site as well? And then secondly, on the SMS side, if you could talk about, you know, I understand the guidance on a quarter-on-quarter basis, but if you could also just explain how the current exit rate record [ph] was on a year-on-year basis?

And what would you need to see for your - it to further accelerate, especially given that aerospace probably is going to take longer to recover. And when - by when would you expect the order levels to reach, let's say 2019 level and beyond?

Or grow from that level?

Yeah, I mean, if we start with the mining question. The pipeline, the general pipeline is strong.

And that's what we see. I mean, it's the second quarter in a row with very good order intake.

How that will ultimately convert into orders going forward? We expect a strong performance, but I don't want to speculate in specific larger orders, and so on.

But, yeah, the CapEx guidance from our customers is strong. We would expect it to continue at a good level.

And then in terms of specific projects, yeah, there are also there, of course, some activity, especially in related to some minerals with very good prices currently. But I have no specific guidance there either.

I think we have to go to our customers to ask those questions. For SMM, it's clear, as you say, aerospace is still low.

I mean, essentially, it's the same level as it was in the fall. For order trends to continue sequentially to improve sequentially, I'm talking about now in SMS, we need to see general engineering to continue.

I mean, it's on par with prior year now. There should be a possibility for that to continue to improve.

Automotive already at a good level, we’ll see what that can bring. Then we need to see aerospace also starting to pick up.

We see, of course, some delivery numbers improving, among customers we see some air travel statistics picking up. So - but I don't want to speculate on when that will start to hit our order books.

I think we will start to see some sequential improvement eventually here. But exactly when, I don't know.

But that is the last thing we need to eventually get back to - to growing beyond 2019 levels.

And if you could talk - contextualize the exit rate in terms of year-on-year trends. Are we in the growth already - growth levels already?

The exit rates in March?

Yeah, you talked about mid - low to mid single digit rate in April, right. So just wondering what does that mean in terms of year-on-year comparison?

Yeah. But if you - if we say that the quarter was flat from dailies [ph] and now in April we are up single to - low to mid single digits.

It would imply of course growth even compared to Q1 levels, yes.

Okay, great. Thank you.

Yes. Good afternoon, everybody.

Thanks very much. If I try to compare SMM as organic growth over the past couple of years to some of the older industrial companies we cover in the space in Europe.

It seems that SMM has lagged the broader capital goods sector growth by nearly 20 points now over 2019, 2020 in total. So I understand this is largely related to mix effects, given SMS exposure to aerospace and energy market, and also given its comparatively lower exposure to China.

But my question is really about the catch-up potential from here? Did you think that SMM will be able to fully catch-up the lost ground in the next couple of years?

And therefore outperform the sector growth? Or do you rather see some fundamental shift structural changes in the tooling market that would prevent that from happening?

I don't see any fundamental shifts, as you describe it. I mean, I cannot really relate to all the numbers you are referring to here since you compared to others, so to say, we tend to focus on ourselves, if you see what I mean.

But I mean, if you take - just take aerospace as an example, if it's down now, in the region of 40%, and you weigh that with the exposure we have in aerospace in SMM, you would immediately have, I guess, half of the gap you just mentioned here as an example. So when we look at automotive now in Q1, for example, we have seen that we were lagging a little bit in end of Q3 and Q4 in our automotive figures versus automotive production.

But on the other hand, we see that we are overshooting now in Q1. So, you know, quarter-by-quarter, there are these effects, but I don't see, if we look at each specific market that we are behind.

So I can only see the mix impact in various segments in the way you describe it.

So for you, it's just a question of mix. And the quick exercise you did for aerospace, can you perhaps do it too for the energy market and some of the other general engineering applications would that be possible?

Well, general - engineering I cannot break down further than just general engineering. And there we are now flat year-over-year.

And I don't know exactly what you would compare that with towards you know, end market data or statistics. But that's where we are.

For energy, we are down in the double digits in [indiscernible]. So you can do the same math there and you will get even closer to that gap you mentioned.

Thank you.

Okay. Understood.

All right. Thanks very much.

Yes, hi. Thanks for taking the questions.

I have a couple of please. So first of all, can you perhaps give us an indication of the order intake growth for the mining divisions?

If you were to adjust for catch-up effects and pre-buys as well in the quarter? We'd be interested to see what the underlying growth there is in the mining side.

Then secondly, I understand that from a supply chain constraints you're not directly impacted by the semi chip shortages impacting the automotive production. But you talked about some supply chain contracts within your own factories.

Can you perhaps just help us understand which components are where you see those sort of bottlenecks and which divisions are impacted? And then lastly, perhaps if you could just help us with the inventory changes and how that has impacted SMMs margin in the first quarter?

Yeah, I'll take the first two, maybe you can take the last one.

Okay.

I cannot really give you a good number on what you call the - an underlying order intake in mining, because it's not always – I mean, we cannot always see what is a catch-up, what was a pre-order versus a normal order, if you see what I mean. So I think I have to pass on that.

It's something we are also of course, trying to understand, but I think trying to guess a number would just - yeah, it would just be speculation. So I think you're like us.

We'll have to figure that out based on more - other fundamentals, I guess. On the component side, it is - I mean, SMT and SMS, obviously highly vertically integrated, no issues on the supply side - in that supply chain in that sense.

Rock Processing is also fairly integrated and not - they have some raw material price impact that they are compensating with their own price adjustments, but really not that much of a constraint. So, it is on Mining and Rock Solutions, where some of the larger ingoing components, you can have hydraulics brake systems or engines and so on, where a quick ramp up is causing some constraints in the in the supply chain.

So far it's being managed. And it's important to note that when we - I mean, you have a six up to nine months maybe lead time in these orders anyway, so we had already planned for the next half year in a sense.

So it's a lot now to manage deliveries for Q4 and even Q1 of next year that the team is working on.

Okay.

Should I do the production rates? Okay.

Yes, of course, production rates are going up for SMM and it has a positive effect on the EBIT margin, 60 bps in the quarter. So really, it's not really inventories straight up and down.

It is how the production rates are moving and what we're - up or down and what happens is that you get over or under absorption. But right now we get some over absorption from increased production rate, so 60 bps and that translates to 20 bps for the full group.

There's a little bit of a negative number for SMT here, but the total is 20 bps up for the group.

Understood. Thank you very much.

Yeah, thanks for taking the call. The question, actually just continuation of Rizk’s question actually.

Just coming back on this point about what you're saying on Rock Processing, and about whether there's been a catch up effect, and the pre-ordering. Could you maybe just elaborate that catch up effect is unique to Rock Processing on the aftermarket side?

Or do you see in SMR as well? And is it something that you would expect to continue as we go into Q2?

And then again, on the pre-ordering, I think you said it was - it was on the mobile side specifically, could you just elaborate about why it's affected that business specifically?

Yeah, we call it out for Rock Processing because they had an aftermarket growth of over 20%, and that is not sustainable. There, we want to call out that there is a catch-up effect, we see a high mix of spare parts, which typically indicates that they have been running their equipment for longer last year, and now they need to replace some spare parts.

In Mining and Rock Solutions, maybe there is some catch-up on the - but more marginal and the aftermarket growth there are 9%, it’s not as uncommon in the situation that we are in. So I think it's primarily a comment for Rock Processing Solutions.

There might be some in Mining and Rock as well. Then I forgot your last question.

What was that?

It was just on the - you mentioned the pre-ordering…

Yeah…

I just wanted you to elaborate that – what was going on there?

Yeah. On the on the mobile crushers, we typically have a good order intake in Q1, as ordering for the construction season later in the year.

And we had - we have had a very strong order intake there. And then typically customers will see when they place an order that maybe the lead times are a bit longer than they had expected.

And then typically, they might place a second order later in the year and in some cases, now they might have come back and placed also that order now to secure a production slot so to say within the timing that they wanted. So that's what we saw on the mobile side.

Okay, thank you. Just one more very quickly.

I just wondered if you could I noticed there's some comments on the wires [ph] about price increase. I was just wondering if you can elaborate about what's going on with pricing and whether you're successfully offsetting the impact of any raw materials inflation you see?

Yeah. SMT of course has pricing built into their surcharge, I mean, its built into the system so to say, so that's not a big factor when raw material prices change.

SMS, I mean, we have our own powder business, not very much impacted to the extent they are - they can offset it with price. They had a price realization in the quarter 1.2% for the cutting tools, which I think is good under these circumstances.

Both Mining Rock and Rock Processing have done price adjustments. In some divisions they are going back now to do a second round.

Simply because they see, you know, cost inflation and they want to secure that we don't fill up the order backlog with sort of the wrong pricing. So at this point, we feel it's being managed in a good way.

There might be some timing effects, sometimes it works against you, sometimes it works for you in terms of when you can realize price versus when you get the price increases in through your supply chain. It depends on lead times and so on.

But overall, I would say over time, at this point, it is being offset in a reasonably good way.

Okay. Thank you very much.

Thank you. I think we end this with one last question from the web.

And it's from William Mackie at Kepler Cheuvreux.

He's wondering, the Wolfram had a 200 bps impact on the order intake, could you give some color on the actual growth?

Yeah. It's - if you do the math there, I think you can probably do the math more or less, but its almost triple digits, is what you could say.

I mean, very, very high double digit growth, which is fairly typical. I mean, we see it also in our additive business and on the powder side where the market is picking up.

And you want to secure deliveries of the powder. So it's early in the supply chain, so everyone want to protect their supply.

So you get this bullwhip effect with very high orders coming in.

Thank you. And with this, we close the Q&A session and we also conclude this hour with saying thank you for calling in and for your questions and wish you a nice afternoon.