Sandvik Reports 25% Organic Revenue Growth in Third Quarter

Sandvik (OTC: SDVKY ) reported third-quarter financial results on Thursday. The transcript from the company's third-quarter earnings call has been provided below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

View the webcast at Summary Sandvik reported a strong Q3 2026 with total order intake growth of 20% and organic revenue growth of 25%, achieving a profit margin of 22.5% and record-high cash flow. Strategic initiatives included the launch of a concept surface drill rig and digital solutions showcased at industry events, along with a new Manufacturing Lifecycle Management solution. The company noted robust demand in mining and infrastructure markets, with particular strength in aerospace and defense, though light vehicle demand in China was subdued.

Operational highlights included solid growth in the Mining segment and innovative product launches in Rock Processing and Machining, despite fluctuating tungsten prices impacting the latter. Management highlighted continued strong financial performance, strategic progress, and resilience in adapting to market volatilities, with a positive outlook on demand and innovation. Full Transcript Luis Cheddar (Head of Investor Relations) A warm welcome to Sandvik's presentation of the third-quarter results 2026. My name is Luis Cheddar, Head of Investor Relations, and beside me I have our CEO, Stefan Widing, and CFO, Cecilia Felton.

We will, as we usually do, start with the presentations. Stefan and Cecilia will take you through the highlights of this quarter, and after that we will move on to the Q&A session. So with this short introduction, it's over to you, Stefan. Stefan Widing (President & CEO) Thank you, Luis, and also from my side.

Hello everyone and welcome to the third-quarter report. If we summarize the quarter, we think this was a very good quarter. We see broad-based demand, we have strong operational execution, the profit margin is above our target range, and we also have a record-high cash flow. In the quarter, total order intake grew by 20% and the organic order intake growth was 17%.

Total revenue growth was 29% and the organic revenue growth was 25%. Adjusted EBITDA came in around 8.5 billion SEK and this corresponds to a margin of 22.5%, up from 19% in the prior-year period, and the rolling 12-month EBITDA margin is now at 21.3%. Adjusted profit for the period amounted to 5.8 billion and the free operating cash flow then came in at 7.2 billion, up from 5.6, and corresponding to a cash conversion of 87% in the quarter. If we focus a bit on some of the key strategic highlights in the quarter, starting with Rock Processing, a good product launch in the screening business on the compact screen size.

We usually have engineered products in screening, but these are standard products that are pre-engineered, and this means that we can deliver faster and also reduces the amount of time we have to spend on each order, so a good product launch from them. On the mining side we had our Future of Mining event with over 600 customers in the quarter, and there we launched our concept surface drill rig, which showcases the future of surface mining. This is a fully automated and battery-electric machine combining AI, robotics, electrification and digital connectivity, and it shows our vision for how we think surface mining will develop in the future.

Those of you that will attend our Capital Markets Day in Finland in November, you will get to see this machine performing live in our surface test mine outside of Tampere. Intelligent Manufacturing had a milestone also this quarter. We participated, both Intelligent Manufacturing and Machining, at the IMTS trade show in Chicago. This is one of the largest manufacturing trade shows in the world that happens every second year, and here for the first time we showcased our digital solutions under the Sandvik brand umbrella.

And we also launched a new solution called Manufacturing Lifecycle Management, where we connect the dots between design, machining and quality data across the entire lifecycle for the first time. Also this we will showcase more to those of you that will attend the Capital Markets Day in November. And also to show that we of course innovate in our core product range, Walter released a new portfolio of solid carbide end mills in the quarter. These are products that are tailored for the aerospace sector and especially hard materials such as titanium and special-grade stainless steel.

So important innovation in the core business as well. If we shift to focus on the market development, we continue to see a robust development both upstream and also downstream. High commodity prices continue to underpin strong activity and we see a good demand both for equipment and aftermarket. High utilization rates and an aging fleet of course drive consumption demand for parts and services.

Also this quarter we continue to see a good interest and demand for our digital automation solutions. And we also see now a bit of an increased activity in downstream mining, even though we do not see it in the order book yet. But we do see an increased activity, which is positive. Infrastructure market also continues to develop positively.

We should highlight demolition and recycling and also North America, which is where we see the most positive market sentiment, but also slightly positive in aggregates and in Europe. If we look at the industrial segments starting with general industry, we see a quite broad-based demand picture here, up across all regions. Aerospace and defense is very strong, also across all regions. Light vehicles continues to be subdued.

We could say that Europe and North America are stable at low levels, while China deteriorated in the quarter. India is really the only larger market where we see a positive development in the quarter. And then for the other segments, mining, energy and transportation, medical and electronics, we overall see a positive development with some specific highlights around the power generation and some of the transportation segments. If we look at our organic order intake for cutting tools in the period, that of course broadly, or in most cases, aligns well with the underlying market, with a few deviations.

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

So that has a negative impact in the quarter for that business. Otherwise light vehicles, also you can see that negative in China. Europe is up high single digits, but there's of course a lot of price in there, so the volumes are actually down. North America also slightly down on volumes.

Otherwise I think there are no specific things to call out in this picture. If we go to orders and revenues, orders close to 37 billion in the quarter. Revenues 37.7, book-to-bill of 98%. As you recall, we typically have a second half of the year with higher deliveries and usually a slightly negative book-to-bill below 100%.

So this is nothing unusual for the season. If we look at this from another angle, organic and structural growth, I think a key thing to highlight here: it's the sixth straight quarter in a row with double-digit order intake growth and solid organic growth across this period. And this was also a quarter where we started to meet a bit higher comps. We grew 16% in the same period last year and now 17% this year.

So I think strong, strong order growth on top of a strong quarter last year. Revenues, of course, we continue to ramp up and very solid execution there with a 25% revenue growth in the quarter. Going into our business areas then, starting with Mining. Again, very solid demand across both equipment and aftermarket.

We have good organic order intake growth driven by strong growth across all our aftermarket divisions and summing up to 16%. Equipment, 23% growth if we exclude major orders. As you recall, we grew equipment by 75% last year driven by large orders. I think the large orders this quarter are okay at 700 million, but very tough on the comp side.

So I don't see this as anything that is concerning in any way. Profitability was strong at 4.3 billion, profit margin of 21.8%, good organic leverage of 31%. And then a little bit of a mixed impact from currency, where it had an absolute positive impact, but since the top line was even more positive, it had a slightly dilutive effect on the margin in the quarter. You can also see the split: brownfield 55%, greenfield 13 and replacements 32%.

This is fairly in line with what it has been in the past couple of years. Maybe slightly stronger. Greenfield at the expense of brownfield. At the expense of greenfield.

A couple of percentage points. If we look at the average over the past couple of years. Rock Processing then, robust underlying demand in mining and also, as mentioned, the positive market sentiment in demolition and recycling. Total order intake though decreased by 2% and the organic drop was 8%.

Here we had no major orders this quarter while we had a couple of large orders last year, so this was more flattish if we exclude for that. We also see a very strong demand in aftermarket, which is positive, shows the activity levels in the business. But orders on the equipment side in this a little bit smaller business area are lumpier, and that we also see in this quarter. Adjusted EBITDA 418 million, solid margin of 15%, basically the same as last year, down 10 basis points.

We have a negative operating leverage in the quarter since the revenue growth organically was flat. It's very small numbers we're talking about here. And we are investing in the frontline as we see a positive demand picture going forward, which means we have a little bit of higher cost there in the quarter that is not yet met with higher revenues. But again overall small numbers in that bullet point.

And currency also a small impact, accretion of 10 basis points. Machining then, positive demand as mentioned across the board, except for light vehicles. Total order intake grew by 35% organically, or at fixed exchange rate 33, and also organically 33%. Cutting tools grew by 19%.

In that number we would say underlying volume improvement around 5%. On top of that a couple of more percentage points driven by pre-buys, and then the remaining part is essentially price. We continue to see development continuing in the same way now into the fourth quarter. EBITDA was high, 3.7 billion, margin of 25.7%, up from 19%.

Here we then have positive contribution from the higher volumes, from the powder business, and also from our savings programs which are contributing 82 million in the quarter. The temporary timing effect coming from tungsten came in at 104 million, which is about 100 million lower than our guidance, and this corresponds then to an in-quarter effect of 70 basis points. The leverage was very good in the quarter, 45%, and currency had a slight positive impact of 10 basis points. Intelligent Manufacturing had a very solid and I would say uneventful quarter.

Broad demand across the board, strongest coming from aerospace and defense. We have a double-digit order intake growth in both licenses and subscriptions. If we normalize for the negative 2% that comes from the transition towards subscriptions, the order intake growth was 14% underlying in the quarter, and profits were also good: 258 million, leveraged at 33%, and a margin of 27.1%, which is very strong, neutral from currency in absolute terms, slight dilution on the margin, and then also a very positive effect from our acquisitions year over year. So with that I hand over to you, Cece.

Cecilia Felton (Chief Financial Officer) Thank you, Stefan. All right, so let's dive into the numbers then in a bit more detail together. As Stefan said, strong growth on both orders and revenues which resulted in order intake just short of 37 billion and revenues of 37.7 billion. Earnings came in at 8.5 billion corresponding then to a margin of 22.5%.

And this is the second consecutive quarter where we are above our margin corridor. Net financial items came down compared to last year as you can see here. Tax rate excluding items affecting comparability and also on a normalized basis was 24.3%. So in line with guidance, net working capital continues to gradually come down.

We're now at 27.2% and this is on a 12-month rolling basis and you can see that it is an improvement of 2.1 percentage points compared to last year. As Stefan mentioned, it was a strong cash flow quarter, 7.2 billion corresponding to a cash conversion of 87% in the quarter. Returns also improving year over year reaching 19.1%. And if we exclude PPA we are at 20.4%.

Adjusted EPS grew by 65% compared to last year and reached 4.64 SEK. So good earnings growth and also margin improvement compared to last year. And this is primarily driven by higher volumes, good profitability in powder solutions and also our ongoing savings program. As Stefan mentioned, the temporary timing effect from the tungsten price development came in a bit lower than what we guided at 104 million.

And this is due to, as you might have seen, tungsten prices came down slightly towards the end of the quarter which resulted in a revaluation of our inventory and hence the slightly lower outcome. However, at a group level this corresponds to an in-quarter impact of 30 basis points. It was a good, all in all a good leverage of 37%. Currency was slightly dilutive, 20 basis points, and as you can see here in the graph, on a 12-month rolling basis the margin is now at 21.3%.

If we continue with the bridge then and as usual we'll start with the organic column. The good leverage of 37% resulted in a margin accretion of 3.6 percentage points. Currency was positive as you can see here, both on top line and on EBITDA, but the top line impact was bigger and hence there's a slight margin dilution of 20 basis points. Structure was slightly accretive and all in all that brings us from a margin of 19% last year to 22.5% this year.

If we continue down in the P&L, looking at net financials and as usual starting with the interest net, here you can see that it came down but very slightly compared to a year ago. And this is the net impact of on the one hand lower borrowed volumes. But as you can see here at the bottom of the table, we also have a higher borrowing yield. Then last year we had a negative impact in FX and other asset classes, whereas this was slightly positive this year.

And these are the main explanations for the reduction in the finance net. Tax rate, as you can see here, very uneventful in the quarter, 24.3% on a normalized basis, which is in line with our guided range. And here you can see that net working capital in relative terms continues to trend down. As I said, we're now at 27.2%.

And on the right-hand side you can see that this is primarily driven by Mining and Rock Processing. So good development and achievement so far, but also a continued focus area for us going forward. If we then continue with free operating cash flow. And as you can see in the bars here, it was a strong cash flow quarter, 7.2 billion corresponding to a cash conversion of 87%.

You can also see that on a 12-month rolling basis cash conversion is now at 75%. And looking at the year-over-year development, you can see that EBITDA adjusted for non-cash was significantly higher compared to Q3 of last year. CAPEX was a bit higher. And then you can see the impact of the net working capital build-up, all in all then ending up with a free operating cash flow of 7.2 billion.

Financial net debt remained at 30 billion. It's the same level as we had in the second quarter. And net debt also remained at 37 billion. Our balance sheet target however came down slightly.

We were at 1 at end of Q2, we're now at 0.9. And this is driven by a higher 12-month rolling EBITDA. Looking at outcome versus guidance, currency came in at 158 million. The temporary timing effect from the tungsten price, as I mentioned, 104.

And then on a year-to-date basis CAPEX is now at 2.8 billion, interest net at 0.5 and the normalized tax rate at 24.2. And looking ahead then at the fourth quarter and full year, we expect a continued positive currency impact of around 0.6 billion in the fourth quarter. In terms of the temporary timing effect from the tungsten price development, here we expect a limited impact in the fourth quarter and this is based on the tungsten prices as of last of September. We will also have a tariff refund in Machining in the fourth quarter and this will be of around 400 million which will then negatively impact both order intake and revenues for Machining.

As we have received these tariff refunds, we have booked them as a liability on our balance sheet and this means that there will be no impact on absolute EBITDA then for the full year. We have left guidance for CAPEX and tax rate unchanged but we have increased the guidance for interest net slightly to 0.7 billion. And with that I will hand back over to you, Stefan. Stefan Widing (President & CEO) Yes, thank you.

I just want to clarify when we talk about the tariff refund that we have already received that refund and now we're talking about that we will give this back to our customers. Just so there's no misunderstanding there on the conclusions. I mean if we start on the macro side, we have said already continue to see a strong demand in upstream mining and also an increased activity downstreams.