Sandvik AB (publ) (SAND) Earnings Call Transcript & Summary

A warm welcome to Sandvik's presentation of the second quarter results 2026. My name is Louise Tjeder, Head of Investor Relations here at Sandvik. And beside me, I have our CEO, Stefan Widing and CFO, Cecilia Felton. We will, as usual, start with the presentation, Stefan and Cecilia will take you through the highlights of the quarter. And after that, we go on to the Q&A session. So without further ado, over to you, Stefan.

Thank you, Louise, and welcome also from my side to the second quarter report presentation. To summarize the quarter, it was a very strong quarter with record revenues and profits. We see strong momentum across key regions and segments as well as also good price realization, which is, of course, very important in the current environment. Total order intake grew by 17%, and organically, we grew by 70% as well. Total revenues increased by 24%, but organically 23%. Adjusted EBITDA came in at SEK 8.3 billion, up from SEK 5.6 million in the prior year period. This corresponds to a margin of 22.6%, up from 19%. And rolling 12-month EBITDA margin is now 20.4 million. Adjusted profit for the period, SEK 5.8 billion, up from SEK 3.7 billion, and the free operating cash flow came in at SEK 3.6 billion corresponding to a cash conversion of 46%. This is on the lower side, but it's driven, of course, by our significantly higher invoicing, and we will go through the components of that a little bit more throughout the presentation. I want to start with highlighting the acquisition we announced in the quarter, which is very strategic for us, the filter press manufacturer Diemme Filtration, which is based in Italy. This means that we are entering a new market segment in mining, filtration and dewatering, and this will also form the base for a new filtration division within Rock Processing. We have said for a number of years that we have a strategy to grow in attractive initiates in downstream mining. We started 3 years ago with the acquisition of Schenk to complement our crushers with screens. And this is now -- these next steps we're taking as we also now go that into filtration and dewatering. This is a very attractive business besides the structural growth in mining Filtration is growing even faster. This business market that they are in is growing around 15% per year, driven also by regulatory trends where mine operations want to derisk the tailing dams and also to get the permits to operate the mine, they increasingly move to filter process instead and you need large filter process for this. And in this segment, Diemme Filtration is the market leader. They have a total addressable market of SEK 20 billion in their core offering. If we had also adjacent offerings that they have, it increases further. Good growth, as I said, the company has revenues of SEK 1.1 billion expected this year. accretive margins and a higher share of aftermarket. So all the attributes that we would like to see in what we call them the attractive niches in industries mining. So a very strategic acquisition for us in the quarter. Other key strategic highlights in the quarter. listed here, Dormer Pramet’s released a new turning grade with increased tool life and productivity for our customers. This is an important launch for us to capture the growth opportunities we see in the middle market. And then very important is a completely new generation of AutoMine called AutoMine Aura. This is a complete rewrite of the AutoMine platform. So making sure we are on the latest and a modern technology platform that can scale for the future. It also adds a significant new features, such as 3D mapping in real time. Currently today, the automation solutions used in mines have a 2D navigation system. Going full 3D means that we can, in real-time map the tunnel of 9, we can see things like potholes and rocks on the ground. And overall, it means we can increase the speed of the automated equipment by over 15%. And has also been validated by customers in their natural environment. So really important new technology step for us in auto mine to make it easier to deploy, easier use and increase productivity further. And then intelligent manufacturing in collaboration with machining have inaugurated a new innovation hub in Pune, India. This is a good talent pool, not only for software and AI staff in general, but also for CAM engineers. There's a lot of software companies there, CAD and CAM, I should say. So it's a good place for us to have a new innovation hub that we expect to scale up to around 400 people now in the midterm. So an important part in growing our digital offering. Looking then at the market development, starting with mining. We continue to see very favorable market environment, both streams and downstreams. Of course, favorable commodity prices is what is spurring the high activity. We see high production rates among customers. And we also have an expanded and also somewhat aging fleet, which means that the consumption of spare parts and maintenance is very high currently. We also see investments in new equipment and brownfields are making up by far the largest share of this. I'll come back to that. And then also very strong demand for both digital and automation solutions in the quarter. Infrastructure here, we continue to see a recovery, both in Europe and North America in both aggregates and demolition and recycling. Asia is a bit more flattish. It continues to be muted by the market in China, which continues to be, yes, fairly muted. If we look at industrial manufacturing, we see a good market development almost across the board. Very positively, we see an underlying improved sentiment in general industry with some underlying volume increases. We continue to see very strong aerospace and defense. Light vehicles is maybe -- or it is the only segment I would call weaker this quarter. Europe is flattish. North America flattish a little bit stronger than Europe, but still flattish underlying. China is down in the quarter. India is up. Rest of the world is also flattish. Mining and Energy is improving. I would say it's maybe the segment that is improving in the most interesting way. We see quite strong demand from energy customers as they are delivering gas turbines and diesel generators to data centers. Transportation also positive, a little more flattish in Europe, but otherwise good across the board in the world. Underlying medical and electronics also strong, especially driven by Europe. These are the underlying market trends and now looking at how our organic order intake development for cutting tools look like. It, of course, reflects very closely, but there are a few things that sticks out. But if you look here, general industry, aerospace and defense are up double digits across the board. Light vehicles a bit weaker up mid-single in Europe, double in North America, high single in China and overall up high single digits. But looking at then the underlying market trends, you will understand that it's quite a lot of the price and other effects in this. So this does not reflect so much the underlying market. Mining and Energy up double digits across the board. Transportation, up double digits, except in Europe. Medical and electronics here, we are a bit down in Europe and North America. This is still a quite small segment for us, so it will be a bit volatile quarter-by-quarter. This typically reflects more specific customer dynamics that will vary across the quarters. Over time, we should follow the underlying trend. Order intake and revenues. Order intake of SEK 37.8 billion, revenues of SEK 36.8 million, book-to-bill of a positive 13%. And looking at this separate and more sequentially, we can see that order intake has now been up double digits, 5 quarters in a row. And what's pleasing to see here is, of course, that we continue to grow at a high space even though the comparables this quarter was also double-digit growth quarter. revenues, a very clear trend that we are successfully ramping up, converting the orders into revenues. But as you saw previously, we still have a positive book-to-bill. So we are still building order backlog but we now have a good momentum in also the in which will, of course, turn into profits and cash flow as we go further. Then going into the separate business areas, starting with Mining. We continue to see high activity, strong demand and the record high order intake. It's the first quarter where we note over SEK 20 billion in order intake in a single quarter. Aftermarket business is very strong, driven by parts and services and digital mining technologies. As you can see here up 17% in the quarter, which is quite exceptional for the aftermarket business. Equipment also grew a more modest 2%. But then on comparables that are -- that were all-time high in the quarter -- same quarter last year. So we still think that's a good number given where we were last year with a growth of 50%. Excluding major orders and order intake increased by 13%. Profitability came in at SEK 3.8 billion. a margin of 20.5%. Here, the organic operating leverage was 25%, which is on the weaker side. We had a couple of one-offs in the quarter that impacted negatively with some litigation costs related to a settlement and also on customer mine -- diamond mine in South Africa closed, which hit us a little bit in the quarter. Currency also had a negative impact of 60 basis points. You can also see the breakdown there that brownfield continues to be very strong, 66% of sales order intake, I should say. Greenfield and replacement 26%. And this is very much driven by strength in brownfield, greenfield and replacements are also very strong. Rock Processing then, solid demand in mining, positive development also in the Malaysian and recycling and aggregates. Total order intake increased by 8%, organic increased by 7% and Here, we also got a major order from LKAB in the quarter of SEK 173 million. This is fairly unusual for us to get orders of this size in rock processing. I think it's a good sign that the broader offering that we are putting together also increases our potential to get the larger orders also in rock processing. Overall, the organic order intake growth was down 6%. Profitability, SEK 392 million, 14.6%. They had an operating leverage of 25%, which is approximately where they should be. but they had a dilution from currency then of 50 basis points offsetting this. This margin is still not where we want them to be over time, but it's a significant improvement versus the relatively poor Q1 and as we convert now the order intake into invoicing as we usually have a better second half of the year, we expect this to continue to trend in the right direction. Machining. Of course, a lot happening here in the quarter. We see, as I already mentioned, solid broad-based demand for cutting tools with strong growth in all key regions. Underlying demand has improved in general industry and was strong in, for example, aerospace and defense, also energy and mining and transportation. Total order intake increased by 29%. And of this, the growth was 30%. And then as we also write in the report, the cutting tool organic growth was 20%. And and on the sales side or revenue side, 19%. Daily order or but as we have also said, unusually high uncertainty driven both by geopolitical environment and the Tungsten price dynamics means you should take this for what it is. It's an observation for the first couple of weeks. Profitability was very strong, SEK 4.2 billion, almost double from the same period last year. This corresponds to a margin of 28.7%. This is driven by higher volumes, good price realization, good cost absorption in powder and also the savings program. Then we also have a temporary effect in this number. You know that we have a temporary effect from the increased powder prices, which means that we are selling at market prices, and we bought the raw material at a cheaper price. So it's a temporary effect. That is partly offset by that we are lagging a little bit on the price increases in cutting tools to offset this increased raw material costs. The net effect of this is a positive SEK 550 million. corresponding to 380 basis points. So if you want to take out these temporary powder effects and look at the more sustainable margin, you are around 25% in the quarter. The organic operating leverage was good at 5%. And also if you exclude powder, the cutting tool business had a good operating leverage in the quarter. currency, slightly negative then by 20 basis points. Intelligent manufacturing, a very solid quarter, good broad-based demand in both CAM and metrology software, high single-digit organic order intake growth in new licenses and continued strong growth in the subscription sales. Total order intake increased by 15% organically 7%. Then as you can see in the table in the bottom right corner, the subscription transition impact was about 2 percentage points on both orders and revenues. So if we normalize for that, we are approximately where they should be high single digits to low double-digit organic growth. Good profitability development as well, SEK 198 million, up from SEK 151 million with a margin of 22.5% and a leverage of 41%. And slightly dilutive from currency of 40 basis points, but accretive from the reseller acquisitions of 110 basis points. With that, I hand over to you, Cecilia.

Yes. Thank you, Stefan. All right. So let's dive into the numbers in a bit more detail together. And as Stefan mentioned, we had good growth on both orders and revenues. Orders reached SEK 37.8 billion and revenues SEK 36.8 billion. Adjusted EBITA came in at SEK 8.3 billion, which then corresponds to a margin of 22.6%. Looking further down the P&L, the net financial items came down year-over-year. I will show you a bit more details on the development there in a few minutes. And the tax rate, excluding items affecting comparability and also on a normalized basis was 24.2%. Net working capital continued to trend downwards. On a 12-month rolling basis, we are now at 27.5% and it's an improvement, as you can see here, of 2.1 percentage points compared to last year. Free operating cash flow came in at SEK 0.6 billion, and this corresponds to a cash conversion of 46%. You can also see here that rose improved year-over-year and also that we had good growth in adjusted EPS. As said then, adjusted EBITDA increased year-over-year. It reached SEK 8.3 billion. It's an increase of 48% and compared to last year. And this is driven by a combination of higher volumes, strong price realizations and cost savings. And then as Stefan mentioned, we also have this timing effect from the Tungsten price development, SEK 550 million in the quarter and at group level, that has -- that corresponds to an in-quarter effect on the margin of 150 basis points. So good organic leverage of 4%. Currency was dilutive by 50 basis points. And on a 12-month rolling basis, the adjusted EBITDA margin is now at 20.4%. If we continue with the EBITDA bridge then, and as usual, starting with the organic column, here, you can see that revenues grew by around SEK 7 billion. and adjusted EBITDA by SEK 2.8 billion. And then as I said, this gives leverage of 40% and then accretion to the margin of 4.1 percentage points. Currency was dilutive by 0.5 percentage points and structure was neutral, which then brings us to a margin of 22.6%. If we continue down the P&L, looking at the net financials, it came down year-over-year to SEK 254 million. And as you can see here in the table, this is driven by a lower interest net which is a result of lower borrowed volumes. The reported tax rate came in at 25%. But if we exclude items affecting comparability, and then also on a normalized basis, it was 24.2%, so within the guided range for the year. Looking at the balance sheet then and starting with working capital. As I said, we continue to trend downwards in relation to revenues, as you can see in the blue line here on the left hand side. And on the right-hand side, you can see that the improvement was driven by all business areas in the quarter. Free operating cash flow was SEK 3.6 billion, as I said, corresponding to a cash conversion of 46% and if you look at the graph here on the left, you can see that on a 12-month rolling basis, cash conversion is now at 80%. And in the table, you can see the year-over-year development, where EBITDA adjusted for noncash was significantly higher compared to last year. CapEx was largely in line, a slight increase and then you can see the impact of the net working capital buildup. Financial net debt increased sequentially from Q1 into Q2. This was driven by the dividend payment in May and that also resulted in a slight uptick of financial net debt over EBITDA. So we're now at SEK 1 billion. Capitalized leases were largely unchanged in the quarter. Pension liability came down a little bit, driven by higher discount rates. And all in all, then a net debt of SEK 37 billion. Looking now at outcome versus guidance. You can see currency. It came out at minus SEK 173 million. And then on a year-to-date basis, CapEx is now at SEK 1.8 billion, interest net at SEK 0.3 billion and the normalized tax rate at 24.1 million. And looking ahead then at the third quarter and full year. Here in starting -- if we start with the third quarter, we expect a positive currency effect of around SEK 0.2 billion, and this is based on the currency rates per the last of June. We also expect to continue to have a positive timing effect from the development of the tungsten prices. And in the third quarter, we estimate this to be around SEK 0.2 billion. And then for the full year, we have left guidance for CapEx, interest net and tax rate unchanged. And with that, I will hand back to Stefan.

Thank you. Going into the conclusion then. To summarize the market and macro environment. We continue to see strong momentum in mining, recovery in demolition and recycling and aggregates during the first half of the year. We also see improved sentiment in general industry and continued strong demand in several other segments such as aerospace and defense. Then of course, the political and macroeconomic environment is very uncertain with everything going on in the world. We don't see any impact of that as of yet. The trends we are seeing is underlying positive, but of course, this creates increased uncertainty. Our financial performance is very strong in the quarter. Order intake and revenues grew double digits. We have record profits and margins above our target range even and if we look at the unadjusted EPS, the growth in the quarter was 63% and over 50% if we look at the adjusted number, which is, of course, a very strong development. We continue also to make strategic process. We have entered the filtration and the watering segment with the acquisition of DM Filtration. We've also strengthened our leading electric offer with our first surface drill rig that is electric. It's a top hammer drill. Also shown here a number of other innovations that we have launched in the quarter. We continue to execute on our strategy, which also means consistent delivery every quarter, while we are continuing to build Sandvik stronger in the long term. I think we have shown in this quarter that we are capturing key business opportunities and responding quickly to both market and customer needs. Sandy continues to be a very strong platform with a strong culture and the mindset where we are winning together. Thank you so much. Let's head to the questions.

Thank you Stefan and Cecilia. Operator we can take the questions.

[Operator Instructions] The first question comes from the line of Chitrita Sinha from JPMorgan.

I have 2, if I may. The first 1 is just on the machining margin. As you said, if we strip out the impact of the 380 bps relating to tungsten, then the underlying margin should be 25%, clearly, a very strong result. With regards to the guidance for Q3, it is obviously very helpful that you've provided. But all things being equal, should we expect a 25% margin to be the underlying level? Or is there anything else that we need to be aware of?

I can start if you want to add something there. I mean, when we break down the margin for this quarter, then we have the temporary timing effect. It's has a positive in-quarter impact of 380 basis points. And as you said, that will then come down as per the guidance for Q3. What will remain is still good profitability in our tungsten mine at these high tungsten prices. We also get good fixed cost absorption in the Powder division. And then on the cutting tools side, in the second quarter, price versus inflation was still a bit dilutive. And then it's, of course, very much volume dependent.

My second question is just relating to the aftermarket development in mining. Can you please elaborate on the drivers of the 17% year-on-year growth as this is now the second quarter of double-digit growth now here this year?

Yes. As we also mentioned, the primary drivers are Parts & Services and digital technologies. Digital technologies has very good growth. driven by automation and Deswik, which is mine planning software. Part and Service is driven by a number of things. Of course, customers are using the equipment to the fullest extent. We have a standing fleet. We talked about that before. Also the fleet is fairly old. All of those things are driving aftermarket demand. services. Also the fact that the fleet we are now putting out there is more advanced machines which tends to also increase the aftermarket per machine because it's more advanced and it becomes more sticky in terms of the aftermarket coming to us since it's difficult for others to service that type of equipment. And then we can also say that on the consumables side, meaning the combination of rock tools and ground support, it was also a good development in the quarter overall. So Yes, I could say simplify it and say it's across the board, but those are the specific drivers.

Sorry, and just to follow up on that, is that development different by commodities? Or is there anything notably different versus on the equipment side?

No, I wouldn't say there is a commodity aspect to that. Of course, if you have a commodity that's where you don't want to mine, it would have an impact. But today, even though it varies a bit all commodities or most of the commodities are at good levels, especially the commodities related to underground.

The next question comes from the line of Alex Jones from Bank of America.

Two as well, please. Maybe first, just to follow up on that service question. is double-digit sort of order growth now the level you would expect and we should expect for that business, given all of those drivers that you just highlighted? Or is there anything sort of exceptional about this quarter, in particular, that means we should expect a slight normalization?

We stick to our long-term guidance of high single digits. We have now a period behind us with higher growth than that. But I think at some point, it should -- it will probably normalize around the more high single digit because that's what we see as a sort of a long-term sustainable pace. Now there has been a number of these things with high production rates. We're converting the fleet from maybe a little bit more older equipment and newer equipment. So maybe there are some additional boosts here or there are. I cannot say or we are not guiding for either how long that could last, so to say. I mean it's up to you, how long you will want to pencil in the double digits. But if you take a long-term trend view, I would say you should put high single digits.

Okay. Understood. And then maybe just on machining profits. I guess if we exclude that timing effect, your profits in the business were up about 70% year-on-year. Can you just sort of what the most important drivers of that are? And the ones that are a bit less important, it seems to me as though volume growth in cutting tools isn't especially high at the moment. So the tungsten mine profitability versus some of the market share gains versus some cost absorption just to help us understand what are the key ones driving that 70% growth maybe?

I'll start with the top line.

Yes. Let's start with the development on the top line -- maybe just also to give 1 data point that could be relevant for you going forward. because I know you're all trying to estimate the split between cutting tools and powder. And what we can say that in the quarter, powder business was 19% of machining from an invoicing point of view. So just to give that as a data point. Then if you look at the development of the cutting tool business, up 20%, we are seeing and what we expect is very difficult for us to see this fully through, of course, but around the 7 percentage prebuy effect. Orders and revenues are at the same level in Q2. But if you remember, we had a higher order intake in Q1. But we are, in a way, still sitting on that backlog even though it's, of course, we have delivered the orders in March, but it has been refilled by new prebuys. And this is in our view of it, that it is expectations of more price increases later in the year, which is a reasonable expectation. So customers are sitting on a little bit higher inventory levels at the moment because of that. So 20% cutting tools, maybe 7% is a prebuy effect. Then, of course, there is a price effect in there. And then what you have left is an underlying market-driven volume of high single -- sorry, low single digits can add maybe 1% or so to that for us because we see we are taking some market shares. Then we also see some longer-term restocking, which is normal in a cyclical upturn to adding to that. So the underlying, let's say, volume-type development is still in the high single digits, you could say, but some of that -- this restocking dynamic, the rest underlying in market share. So there is a volume effect, and I think that helps in this if you take it from that.

Yes. And looking at the margin development then. And this temporary tanks then pricing effect is the biggest contributor to the year-over-year margin development. But then as I also said, we have material impact also from better profitability in our mind and good fixed cost absorption in the powder business. Then on the cutting tools side, price versus inflation is dilutive on the cutting tools as we're still lagging on the raw material costs in comparison to the price increases that we've done. But then we get positive leverage on higher volumes and then we have the restructuring program. But the powder business, both the temporary and the fixed cost absorption that has both of those have a sizable impact on the year-over-year development on the margin.

Okay. And just to clarify, that price cost element is also negative in absolute terms. It's not just margin dilutive because you're raising price a lot and cost is going up the same, but it's actually negative on absolute profit dollars in [indiscernible]?

Yes. Yes. And the net effect of the positive absolute effect in powder and cutting tools duste550 together.

Understood.

And the reason we choose to, let's say, provide it like this is because -- of course, the negative effect you have on the cutting tools side, that is actually something we are having as profit in our powder business, that's where the money end up. It makes sense if you look at machining as a whole to look at the net effect of this.

We now have a question from the line of John-B Kim from Deutsche Bank.

Two from my side as well. Staying on the topic of tungsten. If we use the notionals and kind of track that versus what developed in Q2 I think it might be fair to say there's a little bit of a disconnect. Perhaps any guidance here on how we should think about modeling powder price up and the framework agreements as we had in Q3 and Q4?

I mean I can start and you can see if we want to add something in. It's, of course, quite a few parameters to take into consideration. First, you need to look at the APT price development, but you also need to look at the scrap price. Earlier, they were fairly similar, but actually diverged quite a lot recently. So if you have that as a starting point, and then you need to take into consideration that we say that about 55% of the material that we use on average is recycled material and the rest is virgin material, either from our own mine or from other mines outside of China. So that's some of the parameters need to think out. Then as Stefan said, powder share of machining total invoicing is around 19% in the quarter. which also means then if you do the math, that volumes are down. We also said that in Q1 of this year for the powder business, and they are down low double digits in tonnage, yes. And then, of course, when you look at these indices and you take a quarter average comparing with another quarter average a year ago, and you have very short development during the quarter that can also skew the picture. I think there, it's important to do a more precise calculation also looking at how it has the pricing has developed within the quarter. So I think those are a few things that can maybe help when you try to model the impact here.

Yes. I think this with averages, I think, is a very important point because you almost have to do the calculation on a weekly basis to get even more accurate than the -- personally, I think this quarter is basically be impossible from an outsider to predict this number because, of course, it's a lot of -- it's basically a mathematical exercise. But you don't have all the information. And even for us, if I look at -- looking forward a quarter ago, it's very difficult for us to assess these impacts because the -- when you have things going up several hundred percent over a quarter in a steep curve, the timing becomes very, very important. So that's also why we are trying to guide a little bit more bite a little bit more data. So going forward because now, of course, the prices have been quite stable during Q2. So taking this and the new information you're getting should -- if the tungsten prices stay where they are, it should be a more easily sort of predictable development going forward?

And maybe also on the volume taking orders?

Yes, good point. So another thing we want to remind is that we had very high powder order intake in Q4 and also Q1 and the normal thing, the powder business is that we take frame orders at the beginning of the year for the whole year. And then now it and also in Q4 because of these dynamics, customer wanted to place orders earlier to secure supply. But this also means that now in Q2, for example, we are basically not taking any orders for next year. We have the orders already the order effect you're seeing is sort of the revaluation of the order backlog based on increased tungsten emphasis. So if you are modeling sort of a forward rolling 12 months order intake to sort of always have the next 12 months in the order backlog, then you will end up wrong. What happens now is the backlog is shortening. And then in the fall, we will open up the order book for next year. And we have customers wanting to place orders now. We don't want to take them because it's such an uncertain situation -- so we prefer to wait with that and then we'll open up the order books in the fall. And maybe I should say, primarily Q4 as well.

Okay. Super helpful. I want to pivot to mining for a second. Could you help us unpack the operational leverage in the division in Q2? The incremental year-on-year, I want to say 20, 30 basis points here, you had some ForEx headwinds. You mentioned the mine closure in South Africa. But did the drop-through margins and the velocity of the equipment delivery to meet the expectations? Or is there some kind of one-off or timing effects we need to be thinking about in the print?

Yes. I mean what we've said for mining is that the normal leverage is around 30% and now we came in at 25% in this quarter, and that is primarily a result of those 2 one-off items that we mentioned. First, a settlement for a litigation. And then one-off cost related to this diamond mine that was effectively put into restructuring. So it's those 2. So this is not a drag that will continue in coming quarters. It was specific to the second quarter.

And just a follow-up, if I may. Is there any change in the time line from book-to-bill or order to revenue recognition right now?

No, I would say we're still around this slightly elevated. So maybe 10 to 11 months is where we are sitting with lead time.

The next question comes from the line of Daniela Costa from Goldman Sachs.

Sorry to drill back into the Tungsten. But just wanted to understand sort of you mentioned that you think clients might be expecting more price increases on the tooling going forward. But how do we square that with like Tungsten price in Europe seems to have flattened out over the last couple of months? And I guess tools sold out of China probably have significantly lower prices now, why do you think it's possible to put more price increases? That's the first question. And then just on the math. I think in the last quarter, you have mentioned that you had sort of like a raw material or a COGS lag that could go up to 9 months. So just wondering why you had a negative net price impact this quarter. If or have you started to use things more on spot? Just to kind of understand exactly why it was negative and not slightly positive, given you put prices at the beginning of the quarter in May?

Do you want to start with the Chinese competition development?

Yes, yes, on the price going forward here. I mean you know the dynamic, we have a 3-month lag announcing price increases and so on and of course, when we announced, if we take the mid-May or the early price increase we did, that was maybe announced in early February or so, even if we are a week after that, no, we should have done more. We cannot do price increases every week or every month. So it means there is naturally so we have to wait a little bit. And that's why it's fairly obvious also when you look compared to other players that there will be more price increases coming. We don't see that -- I mean, that should be fairly obvious. In competition from China, I guess, you're referring to that Tantan prices are a bit lower in China currently. This is not a dynamic we are seeing really in our segments also with primarily premium tools, we have always faced cost competition. That's nothing new that's been there for ages. The Chinese players that are exporting are primarily or they are in the mid-market, selling through distribution, always competing on price, nothing new. If you look at what this price differentiation and tungsten between the different regions mean you apply it to the COGS of the cutting tool, it's something we can manage. We are selling on value and not price. Of course, there are also many markets where it's a big resistance to go into Chinese tools as well, which is also putting up a bit of a barrier there. So we are confident that whatever price we need to put through that will also come through.

I think you answered both questions. All right. Any more questions?

We now have a question from the line of Sebastian Kuenne from RBC Capital Markets.