Robit Oyj (ROBIT) Earnings Call Transcript & Summary

Dear guests, welcome to the Robit Capital Markets Day of 2021. And as this is a hybrid event, it's my great pleasure to welcome everyone here on site in Helsinki. Thank you very much for coming and joining us today. And of course, those also online joining us today, hopefully, you are also numerous crowd. My name is Daniel Palander. And on most days, I'm the Head of Operational Excellence, working on supply chain development and inventory management issues, but today is special. And I get to be your host taking us firmly but gently through the program that we prepared for you today. Could you change the slide, please? Thank you. So you'll get to meet the rest of the speakers in a while. So they will give a short introduction in the beginning of each of the presentations. And next slide, please, Tommi. And as you can see, we have prepared a very, very interesting program for you today. We've got a lot of strategy, visions, numbers and even technical aspects about the Robit world for you today. My main task, of course, today is getting a dialogue going. So hopefully, we'll get a lot of questions, and we've organized a bit of time. After each presentation, we have about 3 minutes where we can get questions. And at the end, we've got 20 minutes for a more deeper discussion and a questions-and-answers session. Those who are onsite, of course, you have a bit of an advantage. So once you put up your hand, we will bring you the mic so that the online audience can also hear you at that point. Those online, please use the chat. So even during the presentations, keep those questions coming into the chat, and I'll make sure that they get asked then at the end of each presentation or in the Q&A session. So at this point, again, welcome, everyone. And it's my great pleasure to ask on stage our group CEO, Mr. Tommi Lehtonen, who will give us a presentation on the strategy for sustainable growth. Tommi, welcome.

Thank you, Daniel. First of all disclaimer as a standard part for this type of a presentation. And again, my name is Tommi Lehtonen. I'm the CEO of Robit. I have been in the mining and construction industry for close to 30 years in different global roles, and now since 2017 with Robit as a CEO since 2019. First, again, good morning, and thank you for taking the time to learn more about Robit. Robit in brief. 2020, roughly EUR 92 million in net sales. We have 4 factories, 4 modern factories in Finland, South Korea, Australia and U.K. In total, we have major office locations in 8 countries. We sold 2020 to close to 100 countries directly from our legal entities. So we are a global company. We are a team of 272, what we call, drilling consumable specialists. In addition to this, because of our partnership model, both with the subcontractors and distribution partners, we have a big group of people working full time for Robit outside of our organization. We focus only on drilling consumables, which is so-called OpEx business. When our customers operate, they consume continuously our products. So demand, by nature, for our products, is very stable. Total market potential for our addressable market is around EUR 2 billion and gives us a good room for growth. Robit's market share currently is around 5%. And at the bottom of the slide, you will see some images of our typical products and key applications for us. Let's talk about -- a little bit about company culture. Our brand promise is further faster, and I think it really kind of describes nicely the culture we have in Robit, which is a very sales-orientated, "go an extra mile to serve the customer type of a culture" that has been built through the years. We further developed the culture ahead as a management, of course, using this foundation as a strength, and with our values, we serve it speed, is our first value. Speed is key in any business. Speed of implementation is part of successful business, especially in service business. What this means, of course, is empowerment of our people to make decisions to enable them to serve our customers effectively. We drive change. What is constant in today's world? It's change, right? So how do you take change? We should take change as a positive? Change is an opportunity. Change -- drive change to improve our performance and so on. So we drive the culture of looking at change always as a positive. We respect everyone, that's really a key value for any company. But this means everybody in our community: suppliers, distributors, each other, competitors and so on. So we treat everybody with respect. These values are used kind of the set an expectation to each and every Robit employee. Now we jump into our market. And I would say one strength we have, we have very good knowledge where the potential is and who is playing there in the space. So if you look at the left-hand side graph, it's showing kind of a split per different suppliers how the EUR 2 billion potential is covered. So in this business, we have 2 fairly large-sized companies covering close to half of the market potential. And we are #4 currently on the way to become undistributed #3. Again, there also, we saw a little bit more visibility on how the market potentially split between the key customer applications on the right-hand side. Mining represents about 60% of our addressable potential and construction about 40%. Our addressable market based on our estimation is growing 3% to 5% per year. Mining demand by nature is stable even over the cycles and construction naturally is a local business. Even inside the countries, different areas have different cycles, but we have one common global megatrend, which is the urbanization. So we really truly know where our customers are and how much they use our products from different suppliers. Just a quick look at how our net sales is split between the different reportable market areas for us. And again, kind of highlighting the fact of our global presence and sales share in different markets. We are well present, for example, in all of the key mining markets globally. Strong growth in mining. A couple of years ago, looking at our growth plans, we saw that the mining is the key segment for us to have sustainable growth. We have grown clearly faster in mining, currently representing about 60% of our business. Especially, I want to highlight the fastest-growing segment in mining, which is the underground mining. My colleague, George Apostolopoulos will open the Mining segment more in detail in his presentation. We also have some strong niche businesses like the piling and geothermal well drilling business that my other colleague, Ville Pohja, will open more in detail to you later also in the presentation. Again, construction, roughly 40% of our business. Here, you see also on the left-hand side, the mineral exposure we have for the Lempäälä as part of our business for mining and quarrying part of our business. It's quite nicely split between the key minerals and then you also see the split between the key applications, underground and surface mining and other applications on the right-hand side for our kind of a mining-type applications. Our track record. Okay. We have been able to stabilize after the challenges the company and have started a continuous improvement also with our financials. So we are back on growth track several quarters in a row growing compared to comparison period, and at the same time, driving our financial performance towards our strategic targets. So our strategy, key elements of it. So the basic strategy hasn't changed. Our focus is clearly on top hammer and down-the-hole drilling consumables. Scope is clear. Focus is important in any business. What do you do it effectively and right? Be best at what you do. We look at some strategic cornerstones. We updated our strategic plans end of last year, beginning of this year. And we formed what we call strategic business areas. Ville Pohja here will represent one of the areas, geotechnical business. So we have 3 heads of strategic business areas that ensure that our plans and product development offering plans are market driven. Again, as we have stated earlier, the focus on growth and increasing sales coverage today will come through distribution partners. So we have and will sign new distribution partners to increase our sales coverage. It's a key element of our growth. This is a service business. These products are critical to our customers' operations, and they have a continuous consumption of our consumables. Best-in-class availability is our target to ensure that we are, in a reliable way, able to deliver our products at the right time to our customers. And then on a product development side, our strategic target is to offer best-in-class value to our customers. So building blocks kind of an assets capabilities we have that are key for driving our company towards our big goal of 10% market share and our long-term strategic financial targets of 15% organic growth and 13% EBITDA. Of course, people, our offering, supply chain, our sales and the Robit way describing our business processes. People, of course, key in any business. Again, we have been able to build a really strong team of drilling consumable professionals. It's a global team with a lot of experience from the industry. We have 21 nationalities in 8 countries. We have very strong sales-driven performance culture and continue to work and embrace that. And again, the values are the key element of driving the expectation we have to each other. So what are our focus areas to get stronger? We have had so-called Robit talent program for a long time. We have a good amount of young talent that has been growing with the company. Again, Ville Pohja, who will be presenting later, is a good example of this. So we have a lot of growth within. So while the business is growing, people are growing with the business. At the same time, we are adding some capabilities selectively. And again, George Apostolopoulos is a good example of that, an industry veteran that joined us beginning of this year. Knowledge development is in the core of what we do. We have very strong knowledge development programs and plans that are based on our strategic priorities, and we have been doing this already for a few years. Knowledge is really the key for sustainable competitiveness. We have built an incentive plan that is actually driving daily performance. I have seen a lot of these plans. And unfortunately, in many cases, people are looking at what happened at the end of the year. I think we have a clever solution which is impacting daily behavior. And we continuously work on this mindset that, again, based on the value drive change, how do we improve things in each of the functions? So again, we have a very strong team in place, global team with strong capabilities for our specific business. We have a high-performance comprehensive offering. This is, of course, one of the key foundations for our business. So we have comprehensive offering for top hammer and down-the-hole geotechnical applications. We are able to serve our customers with everything that they need with high-quality products. And this -- to develop this kind of a capability, it's a long journey. So how do we move towards even higher customer value? Again, we have formed the strategic business areas to ensure that all the development we do is really market- and customer-need driven. At the same time, we are moving more to value-add type of discussions with our customers. So we are creating a toolbox of performance, service and different value-add service aspects to our business. We have a very focused and kind of a networked research and development agenda, again, driving our product development towards that best-in-class value. Here, we are working with the best people in the universities, different suppliers and so on. So we move where the best information or capabilities, where the best knowledge is for different areas. We have also so-called engineer-to-value initiatives. This means that sometimes design can be clearly smart and cost competitiveness is taking like a step change. This is actually one of the key elements for driving our profitability, currently. So we are able to, with engineering, improve our cost competitiveness. Highly automated and scalable supply chain. So as I told you earlier, we have very modern factories in Finland, South Korea, Australia and U.K. High level of robotization and automation and good scalability in the current facilities. So how do we drive more competitiveness, and at the same time, best-in-class availability target? We have a good investment road map, let's say, 3 years down the line to be triggered and scale our production in the current facilities. For profitability, we have still a lot to do in our material costs. So we are looking at new suppliers, and at the same time, increasing so-called cost-competitive country share. While we continue to work with our current key partners, we will look for savings from so-called cost-competitive countries. We have always a focus on short-lead times, and this is the key KPI for any of our operations, and Arto will open these targets later in his presentation. And continuous productivity improvement is a culture. Actually, we have a good track record here. If you look at the growth we achieved first half of this year, our top 100 factories were breaking production records, more or less, month after month this year. Sales. Sales coverage is in place. We have a strong distribution network with good customer proximity. We have 4 markets where we have decided to go direct with a direct sales model, and of course, we have highest ambition level for these markets. And again, the strong team of -- global team of drilling consumable specialists. So how to capture the potential of our platform? Our focus is on growing actually with our current and new distributors and capturing the full potential of that platform. We use our direct markets also to develop concepts and service concepts for our distribution network. It's really important that we have these 4 markets where we are touching customers directly with our own teams. We have a very robust distribution management, distribution sales and pricing and management processes in place, and we are driving towards excellence in sales. And again, continuous capability development of our own team members and distributors team members in this consultative way of selling, helping customers to make right choices to reduce their operating costs. Business process is a key element. Arto will speak more about our ESG initiative that we have built now during this year. All key business processes are developed, and we have road maps for those. And we are operating under one common modern ERP that allows us to run the business based on facts. Our target setting, ESG will be part of our daily work. Again, key business process for us for both net working capital management and this target of best-in-class availability is this order to delivery process that we continue to work on. Arto will talk more about that in his presentation. We are ready and will be more and more so very much a data-driven business. So we have good transparency to our data and models to drive the business quickly, if needed, to the right direction. And research and development, we work in networks, as I explained, created a model of pulling best capabilities from wherever it is. So as a summary, Robit has a very focused business model and we purely focus on driving the current platform with organic growth towards our strategic targets. We have all the building blocks in place, organization assets and capabilities to implement these plans towards our financial targets. So Daniel, time for a couple of questions.

Excellent. Thank you very much, Tommi. I don't have any questions yet from the chat. So again, I'll remind you, please keep them coming. We'd really want those also from the online audience. I believe we have a couple of questions. All right. I think your hand up was first. Let's give the mic over there. So also the online viewers get to hear your question. Please, sir.

It's [indiscernible]. Regarding your geographical expansion, you've been talking about expanding the number of distributors in, say, West Africa, Kazakhstan, Malaysia, if I can recall, right? What are the next steps? Where does it stop? Or where do you see the biggest gaps in addition to these areas?

Yes. You were mentioning Kazakhstan and West Central Africa, where we are kind of already ramping up the businesses with those distributors. I think next big focus is North America for us. We have already initial steps taken there, but that's really the key target market for us.

Okay. And then regarding the customers that you're aiming at? Is it easier to capture a customer in the mining sector vis-à-vis construction or where are you spearheading?

Yes. I mean, mining companies typically are large-size companies, but mines operate quite independently. So companies are more like holding companies and decisions are made in the mine, mostly. But I would say mine and a large-size construction company may behave in many ways similar way, but the need is different because construction quite often is a project-type business, while mining is a continuous operation in a single location. Then we have, of course, contractors, what we call, let's say, midsized contractors that can be 200 employees or so and then small-size contractors a few people. So those are maybe the main customer profiles we have. Each customer requires its own approach.

So regarding mining and construction, you are aiming at both, not either/or?

We are aiming at both.

Okay. Excellent. I think we have time for still one question, if you may. Can we -- thank you, Arto.

Yes, this is Tomas Skogman from Carnegie. Could you go to the slide with the financial targets. There. And while you are looking for, I could just ask hasn't the share of these 2 big companies being pretty flat for the last 10 years? It's been around 50% throughout the last 10-year period. Is that right?

Yes. Based on these figures...

Yes, this is about, I mean, the market share. But -- so to my understanding, the market share has been very close to 50% for the last 10-year period for the 2 big companies in the industry. Is that right? Can you...

Yes. I would say, you're right. If you look at our data, this kind of a rough, rough scale has been there. I would say that while last 2 or 3 years, we have actually gained a lot more information and detail related to the split. But at the same time, what we are more focused on is talking about the addressable market. We took the China and India out from this graph. And it's in a way even a coincidence that we end up with a EUR 2 billion, but we have kind of a bottom-up, top-down views on it. And we are quite comfortable that with the reasonable accuracy the data is correct.

Well, now when you start to get your own house in order, would it make sense to consolidate this field of others? Or do you think that organic growth is the way to go? I mean, you could also be a compounder and start buying company after company because it's still a very fragmented industry?

It's a fragmented industry. I think, first of all, if you look at our current platform of sales teams and factories, we have so much untapped potential that we should do that first, right? Because it's driving our profitability, keeping the business focused and clean and drive the performance up. There is a lot of overlapping things. So building quickly a consolidation through acquiring a lot of companies may end up in a mess also. So you need to be pretty selective in that type of processes.

But then about these financial targets because that was what I was going to ask. So you have an EBITDA margin target of 13%. I mean I understand you have had that and you have had troubles with your profitability. But I'm kind of more thinking about this kind of ambition level. I mean depreciation is like 5% of sales at current sales levels. So that means you have an EBIT margin target of 8%, which is quite low in a growing -- in a growth industry that is also capital intensive. I mean it's -- it feels quite low. I understand you are not there at the moment, but shouldn't you aim for more now when you have changed your top line target as well?

Yes. We are not guiding excess schedule for those targets. It's a good point you make, a fair point. I think the Board thinking has been also balancing on capturing the organic growth potential and profitability target. So at this phase, where our focus is growing fast do not squeeze the profitability target too tight to allow the growth.

I'll have to stop us here so that we just keep on. Thank you for the question. This is exactly what I'm hoping to happen, but I think we will move on. And Arto will definitely cover quite a few of these topics in the later presentations. Thanks a lot for the questions. Let's get back to it.

At this point, it's my great pleasure to ask next on stage--thank you, Tommi--our group CFO, Arto Halonen, who will talk about Robit's sustainability under the topic, ESG in Practice.

Thank you, Daniel, and welcome from my behalf as well. My name is Arto Halonen, and I'm the CFO of the company. And also, I'm responsible of the operations for Robit. So ESG, this is obviously an area that we have worked a lot also in the past. But this year, we really wanted to crystallize Robit's vision, targets and road map when it comes to sustainability and ESG topics. The principle when we started the work was that we wanted it to be practical in a way that it touches the -- and people at Robit can relate that it touches the everyday work that we do at Robit. And that's been kind of the guiding principle when we have set up our road maps. So at Robit, we want to be your partner for a more sustainable tomorrow. There are certain megatrends that are kind of supporting this ambition, for example, the electrification of the world, and obviously, Robit, we are part of that value chain. And part of that change supporting our customers to produce, let's say, the required metals and minerals needed so that the world can electrify, let's put it this way. One specific need we work on is also this geothermal energy. And actually, from business perspective, Ville will cover that a bit more. But it is also from sustainability aspect something where kind of our handprint is very positive where we help to build more sustainable methods of producing energy, and also kind of as a megatrend, let's drive towards more sustainable infrastructure. So the 4 building blocks we kind of defined as be the cornerstones for Robit's sustainability vision is, firstly, sustainable partnerships. We want to work with long-term partners, both upsteam and downstream in our value chain, who share the same principles when it comes to sustainability as Robit. We target to reduce emissions in our own operations but also more broadly in the whole value chain. Thirdly, we want to be healthy and happy workplace for everyone at Robit and also partners we work with. And obviously, safety is a very important topic on that aspect. And finally, we strive for efficiency throughout the product life cycle, from the design of the product, all the way to the use at the customer side, and finally, recycling the product. So let's look at these areas a bit more in detail. So our target is to halve Scope 1 and 2 emission intensity by 2030, baseline year being year 2020. The starting point is 36.9 tonnes of CO2 equivalent per million euro of net sales. Majority of our emissions come from the electricity we use at our factory locations, and obviously, that's where a lot of our actions will be aimed at. So we plan to increase the share of renewable energy sources used at our factories and also look to energy efficiency of our factory locations and also other locations, obviously, but the vast majority of the emissions comes from the production units. And then kind of as a next development stage, we want to start to expand and understand better the kind of the CO2 emissions in the logistics change as well. The initial focus now is on our Scope 1 and 2 emissions. Secondly, we value materials and products throughout the whole life cycle. What does this mean? When we design the product, we try to design them as energy efficiency as possible, both at the use at the customer side, but also then on the production stage. On the production stage, we want to aim to minimize the amount of scrap, for example. And finally, at the customer side where customers are using and operating our products want to help them to use them in an optimal way, in an energy-efficient way. So the targets, KPIs we have set in this category is firstly to increase the waste recovery ratio to over 90% in our factory locations. And then as a second target, something we strongly believe in consultative sales training that we aim to have more than 1,000 hours for Robit people or Robit distributor network people. And what do we mean when we talk about consultative sales? I'll give you one example, one case study. This is a case in a quarry in Finland. And kind of the starting point, the initial phase was that the drilling parameters that customer was using were not optimal and the fuel consumption in the drilling process was high and also there were kind of excess heat generated in the drilling process. Robit experts went to the site, worked with the customer, optimized the drilling parameters. And as a result, their fuel consumption significantly dropped. At the same time, the drilling performance, the kind of the rate of penetration got better, and there was less heat generated. To put this in the scale, if you convert this fuel saving on an annual basis to emissions, you would need to optimize in a similar manner 31 drill rigs. So 31 similar cases, and that corresponds to Robit's total Scope 1 and 2 emissions in 2020. So that's why this is an area that we really believe in, and this has a big leverage, and knowledge is a key in this. And that's why this consultative sales is a target KPI that we have also set for ourselves. We want to be healthy and happy workplace. Safety is obviously a topic that we have put a lot of focus also in the past. And it's very important in the industries we work in, it's kind of your license to operate. Another aspect that kind of is a strength and what we are quite proud of at Robit is the diversity at Robit. For example, only in Finland, where we have just a bit more than 60 people, we have 10 different nationalities working for Robit. And we truly believe that that's a kind of value for us, and it is something that we aim to nurture also in the future. Targets that we have on these areas are improving people power index, which is basically employee satisfaction measurement we have done on an annual basis, and we aim to improve on that metric every year. And that's the second target, we target 0 lost time injuries. We build transparent and sustainable long-term relationships. So Tommi talked a lot about the distributor network, and that's really -- we consider it as the same family. Same with our suppliers. We want to build long-term relationships with our partners and with partners who share the same principles that we do when it comes to sustainability and ESG topics. So here, we will target to have more than 90% both the distributors and suppliers we work with Robit to take kind of the ESG principles that we have. Robit is your partner for a more sustainable tomorrow. And we have these 4 key building blocks that we base it on: the sustainable partnerships, reducing CO2 emissions, healthy and happy workplace and efficiency throughout the product life cycle. Now time for some questions.

Excellent. Thank you very much, Arto, for that presentation. And first, I just want to comment to online. I see -- so a couple of questions that came in. And I think I will save them to the Q&A in the end. There was one question, for example, about the acquisitions and also about personnel. So I'll save those up because they were not really on sustainability. I believe we have a question here. All right. Let's take from the front row, please.

It's Antti from SEB. Just a very basic question on the recyclability of your drill bits. So what happens to the bits when they are end of their lifetime at the customer side? How recyclable are they -- are the products after that?

Yes. Obviously, what our products mainly are, they are steel. And steel is a kind of a material stream that is very well recycled, all in all. I think where there could be improvements in recycling is these carbide buttons that you have on the drill bits, that's one thing. But on the hammers, the other products, they are generally very well recyclable. And mostly customers take care of the recycling themselves.

Okay. And then secondly, on the example that you showed and broadly on the consultative sales process, which type of customers are you actually working with? Is this kind of a smaller contractors or is this something that, for example, the mining industry is asking for you to be more kind of proactive in achieving energy savings in the drilling phase? So could you open up a little bit? What are your ambitions and how the business is today?

Yes. Yes, there are obviously different type of customers. And for some, this kind of optimization work could be very much a focus internally as well. But there's a plenty of customers where it not -- doesn't necessarily is that way -- isn't necessarily like this way. So it can be a smaller contractor, but I think it can be very well a kind of larger companies, maybe where the knowledge level of the employees is not necessarily as high as in some other areas. And generally, this is a very good area where the economic aspects for the customer and the sustainability aspects, they are 100% aligned because this translates into lower cost per meter for the customer. So you don't necessarily approach this from sustainability angle, but there is still a strong motivation with customers to work on these aspects.

I'll -- if you can save your question so that we keep a bit on schedule, unfortunately. So we'll take it up at that point. Thanks a lot, Arto.

And at this point, it's my great pleasure to ask next on stage, our VP of Global Sales, George Apostolopoulos. So George, the stage is yours.

Good morning, and welcome to all of you, first of all, to you guys who are physically present; secondly, our online audience. My name is George Apostolopoulos, apologies for the long, difficult surname. I head the global sales for Robit since last December, so pretty fresh in the company. And I've been in this industry for a little bit over 20 years. Partner in mining, and why mining? Mining is a sizable and still a lucrative business. There is a continuous positive outlook. The customers are pretty much loyal compared to construction, for example. There is a steady demand for drilling consumables, even when the CapEx is low. There is a better planning -- a better product demand forecasting, which, of course, helps our production planning. There is a financial strength, and that, of course, helps our payments. We receive the payments quicker, and it represents a very strong reference for Robit going forward. Electrification drives growth. And if we want to take a macro view on the commodities demand for the next 20 years, an outlook, -- on the outlook there, there is a clear trend from coal to copper. The coal is on the decline. There is some stability when it comes to steel, iron ore, lead and zinc. And of course, what's Rbit, it's copper, is nickel, is cobalt and lithium, of course, metal scraps and high-quality steel. This is driven mainly -- I mean the demand for these metals is driven by electric vehicles and other gadgets like this. There will be a USD 50 billion -- actually, USD 50 trillion investment in the next 30 years for -- to get these metals to be produced that I mentioned earlier. Moreover, there will be a USD 1.7 trillion investment from the mining companies for these minerals to come out of the earth. And this is what will lead to a low carbon world because this is the trend. Another megatrend that we observe, of course, is urbanization. Two out of 3 people by 2050 will be living in urban areas, and that's very important. So we're in a strong commodity cycle, so high demand drives high pricing, of course. And then this demand is in turn driven by supply chain and price predictability. Mining will grow 3% to 5%, and this is driven mainly by underground mining. As we said before, the growth is driven by minerals, which are related to decarbonization or electrification, and underground mining is growing faster than surface mining. And this is because there is higher grades, less ore processes and less or smaller environmental risks. So the underground mining will grow by 4% to 5%. And this is from drilling for nickel, this is from drilling for copper, not iron ore. There is investment in ESG sustainability, and this is with a focus to decarbonization, energy efficiency, and this is what we call the social improvement. Now artificial intelligence, digitalization and electrification are there to improve safety. And what is more important for us is to improve production and productivity in drilling. Robit matching mining customer needs. The mining customers are very particular. They have certain characteristics and certain needs. And the characteristics are as follows: they're big in size. They have continuous operations. Their fleet, their equipment is always on sites. They are always in the mine, and they are high-expenditure customers. Their needs: safety, sustainability, services, local stock and relationship. How do we, in Robit, address these needs? First of all, focus. For others, drilling consumables is a part of their business. For us, it's our business. That's very important. Flexibility. We have increased capabilities in selecting the right product. Number three, services. I will talk about product trials. We talk about swift response times. We talk about ring grinding bits, drill master support. Quality. As our CEO even mentioned earlier, this is never going to be a compromise. It's a strategic direction. Our product will always be quality product. Last, but not least, customer centricity. So our distributors are extended Robit family. That's how we see them, that's how we treat them. And then we have experienced teams for direct series. This brings me to my next slide, which is -- this is our model. We operate with a very strong distributor network and a dedicated direct-to-market approach for selected markets. At the moment, 55% of our business comes from our distributor network and 45% from direct markets. Now distributor network, how do we select our distributors? What is in there? We make sure they are very close to customer. It's very, very important. And of course, there are product portfolio synergies. So the drilling consumable must be complementing the rest of the product portfolio. Secondly, they need to have financial capabilities, financial strength. This is needed for investing in both resources and stock. Next, commitment through a common business plan. We sit down and before we sign them up, actually, we draw a business plan commonly, we sign up and we follow it up on a regular basis. There is a collaboration and focus to win accounts, and that's how we work. It's a hard systematic work. It's account by account, simple. I would say, the old-fashioned way, but that's what it works. And last, but not least, commitment, commitment in the Robit brand. If we go to the -- our direct sales markets. These are 4, as we mentioned before: Finland, South Africa, Peru and Australia. There's high ambition level from these markets. We have very experienced people with drilling consumables background in these markets. They -- these are the markets that we basically develop together with the customer always, service concepts that are aimed at reducing the total drilling cost, and this is where we benchmark. And the successful, the proven offerings and service concepts, we use them, we utilize them for the distribution network. Very, very important. Excellence in distributor management. And this is how we basically support our distributors. We have distributors net. That's a platform with a lot of sales and marketing material. All distributors when they sign up, they get their credentials. They have access to this material. Robit Online is an online system, as the name implies. Again, all distributors when they do sign up, they have direct access to this. They can see price for product's availability, they can even place orders. Trainings. We do technical trainings regularly for our distributors and trainings and consultative sales, which is very important. Drillmaster support. Since there is a, I would say, a high expertise within the company, we offer drillmaster support either physically or remotely for our distributors. We have dedicated sales teams and customer service teams that help them on a global basis. And then back to the common action plan, there is a continuously monitored sales funnel. This is what we monitor together with the distributors. The world map with some nicely spread dots there. These are representing Tier 1 distributors. These are some examples. I think there's some 25 on the map. I will pick on 2. One is a company called BIA. It's a Belgian-based company operating in West -- Central and West Africa, all the way down to Zambia. They are the commercial dealer -- they have been the commericial dealer for close to 30 years. And they are also the [ full power ] dealer, drilling machine, drillings rigs. So you see there are the synergies and what I said before about complementing the product. These guys, they have salespeople. They have technicians. They are in and out on the mine on a 24/7 basis, working 360 through 360 depending on the mine. So synergies are very obvious. Similarly, Eurasian Machinery, that's our exclusive distributor in Kazakhstan, very big mining market. We signed them last April, exclusive Hitachi dealer, for both Russia and Kazakhstan, close to 650 people staff. They have workshops in 3 or 4 big cities in -- mining cities in Kazakhstan. And of course, same thing, big synergies. They're always into the mine. These are the kind of dealers we really like and want to work with. A couple of success stories. One is from our direct markets, and this is the first one, it's from a mine in the north of Finland, Kittilä, Agnico Eagle, the customer with a contract of 5 plus 2 years. We started in May, last May. Typically, these contracts range between EUR 1 million to EUR 1.5 million per year. What was the problem? Excessive wear of the bits and changing them very frequently post the threat, safety hazard. So how did we succeed? We offered Diamond series bits, which are more durable, for sure. Drillmaster expertise and then local service present with regrinding, getting customer feedback and customer demands and the -- and the drillmaster feedback, and that's how we convinced the customer that with local presence and good offering, you can really get where you want to go. Second success story is from our distributors. This is Codelco, Chile, the biggest copper mine in the world, and this is our dealer full safety in Chile. This is a 3-year contract. It's higher than EUR 1.5 million a year. The contracts started in 2020. Why we got in there? Performance, availability and very, very important for mining customers, relationship. In a nutshell, partner for mining, why stable demand for drilling consumables globally? For Robit, this is a very high potential to increase our market share. Mining customers have very special needs. We know them when we address them. And the way we do this is through a very strong distributor network and selected direct-to-market approach. Thanks very much for your attention. Now over to you, Daniel, for questions.

Excellent. Thank you very much, George. Yes, excellent. We have -- we don't have anything in the chat. I'll turn it over to here. Do we have the mic? Arto, may you please to the front row first. Thank you.

Yes. This is Tomas Skogman from Carnegie. So you said you came -- was it 2019 to Robit, but you have been 20 years in the industry. So who have you worked for before? And what kind of are the top 3 changes that you have implemented?

Thanks for the question. I joined Robit last December, so it is December 2020. I worked for Epiroc, what used to be Atlas Copco until the split for 18 years. When it comes to implementation, the most important thing is that we have signed up, if I remember, 4, 5 distributors, in the last -- in the first half of the year. This is a major market. One is in Eurasian Machinery. We have signed a couple of other ones. And I think what is a main thing that would try to pass to our teams, we have 8 sales areas across the world, and we work with the local teams, and these are experienced drillers, experienced people. So in essence, what we're doing is, we're assisting with expertise. The problem so far, I mean, this year has been COVID, and we have not been really able to travel and meet customers. The consultative sales is, I would say, something which is being implemented, and this is important. Because when we go meet customers, ourselves or our distributors, we want to be able to go in and speak not only to the procurement people, we want to speak to engineers, and that's extremely important in our business. So this is where the consultative sales help.

Good. All right. I believe we have another question there, please, if we can get the mic over there so online audience can hear as well. Thank you.

Yes. It's [indiscernible] again. My hunch is that you guys are from time-to-time in the process of replacing a weaker performing distributor to a better one. How easy is it for you to change the distributor, I mean, in terms of cost and time spend, et cetera? What kind of contracts do you have with them?

Thank you for the question. Yes, we do have contracts with them. It's not an easy process. You're very right. So we don't really aim at changing the distributors like overnight. It is an expensive process. It takes time, and it's not always successful. So I mean, the cost of changing and distributor and replacing what is already doing is really high. So we prefer to go even exclusive in big markets. We're looking for exclusive financially strong distributors that can really do the work for us. So I agree with you 100%. Changing distributors is not the way for what we want to maintain what we have and ramp up, work with them the best way possible. Of course, in new markets, yes, we would go for new distributors.

Just to continue on that. How satisfied are you with your current distributor network? Do you have any -- currently any needs to replace some of them out there?

As I said, I think at this moment, we're satisfied, and it's most important for us to ramp up and work and improve, grow with an existing platform. I don't think it is a special need to get more distributors. We need to take a step at a time. So we have a very nice platform, a very good platform in key markets, good distributors. We need to start getting more business with them. That's the strategy. Thank you.

Good. Thank you very much, George. All right. I'll then move us onwards. And next, it's my great pleasure to ask on stage, our VP of geotechnical side, Ville Pohja. Stage is your, Ville.

Thank you, Daniel. Hello, everyone. My name is Ville Pohja, I'm the Vice President of Geotechnical Business. I've been in Robit since 2015. So a bit of a Robit veteran we can say, yes, you can see from my gray here. What is geotechnical business? From the down-the-hole business that we publicly report, geotechnical business represents about half of the down-the-hole business. There are 2 major parts in this geotechnical business, but also some other applications. So piling, geothermal well drilling, water well drilling, anchoring and horizontal drilling. In this presentation, I'm mostly going to focus on down-the-hole piling because at the moment it's the most significant part. So I'm going to open up the nature of this business to you. And at the end, a little bit about the growing geothermal market we have. So what is piling? Piling is an essential part in the modern construction. Due to urbanization, most of the easiest place have already been built on. So what remains is the more unstable soil that often then requires piling. So down-the-hole piling is a method of installing steel piles and casing by using the Robit down-the-hole drilling solutions. It's still a bit of a niche method. There are a lot of different ways of operating piling. The most typical ones you see on the slide, pile boring, which eventually have an ogre type of tool to peel off the layers of the soil; or driven piles, which are quite common here also in Scandinavia everywhere where you have concrete piles or steel piles, which are basically hammered by force. So these most common type of piling methods, they work well in easy conditions. But when we go all the time more and the more difficult ones, they start to have difficulties. And that is why a type of piling -- down-the-hole piling have been developed. So we go to the benefits. Down-the-hole piling works in all conditions. When the site investigation shows that there's going to be rock, there's going to be difficult conditions. What the designer can design then down-the-hole piles, and they can be sure that the process is reliable, they can install the piles like it's been planned, and moreover, it's extremely predictable and they save a lot of time. We can say more difficult and more rock they have in the project, the more time is saved and more money is saved by using down-the-hole piling. Here are some examples of our key customers. So we work with some of the biggest customers in the construction industry, if they are operating with their own fleet of drill rigs. Not all of big companies operate in this way. In some cases, they might have subsidiaries, other companies that operate in the infrastructure ground working space. But there are also some quite small operators where they're specialized in piling and drilling works. So what do our customers do? The typical projects can be infrastructure projects like bridges, harbors, dry docks, quarries are quite typical at the moment. A lot of large construction projects, like skyscrapers, arenas; now for example, in Tampere, the Tampere UROS LIVE arena is one reference; malls like the Mall of Tripla and [indiscernible]. They have been all built with down-the-hole piles. Factory buildings, like Metsä Fibre at the moment is building, investing into a huge bioproduct factory in Kemi. And that's been one of our biggest down-the-hole piling job sites in Finland this year. Server holes for Facebook and Google and so on. But it's not only the big ones, it can be basically any size of a construction project, even smaller housing if it's in difficult ground conditions. Like here in Helsinki, areas like Kalasatama or Verkkosaari, more or less, everything built and that will be built have been drilled. The piles have been drilled because the ground conditions are so difficult, typical projects for us. So our customers, they tender for the piling projects, the project and we tender for the tools for the customer. The project values are typically between EUR 10,000 and EUR 100,000, but the biggest might be even EUR 1 million or EUR 2 million. But in this business, we operate through distributors in the same way as in the other businesses. So we do get steady revenue for the distributors who are having the local stock for the local market and the most difficult tools there. So it's not so cyclical as it might sound. The biggest markets at the moment we see are Nordics, Russia and North America. Russia is kind of like a new market, basically started from 0, but in Nordics is kind of like the pioneer of this type of piling. Robit market share is fairly high in down-the-hole piling. So a lot higher than in any other applications where we work in. And that's because this is a bit of a niche business still. And the market potential of what we saw in the slides previously is not as high at the moment as in, for example, mining. So we talk about the range of EUR 100 million, EUR 150 million. But anyway, it's because of the demand, it's been quite steadily growing all the time. So the growth that we see is coming from the growing market, not so much in the growing market share for Robit. We typically operate project-by-project, but with some of the bigger customers we have and try to have yearly contracts to secure the business. So why is the demand growing? Like I said, urbanization, easiest places have already been built on. We need to build more and more in the same places. All the easiest places have already been built. There is more demand to build on difficult ground. And then one other thing is that this method is still fairly young. The first down-the-hole piling projects have been drilled, let's say, 15, 20 years ago. And during the last 5 and 10 years, there's been a steady growth. And the designers, the contractors are more and more accepting this method as a very effective way to work in the difficult ground condition projects. Like I said, the nature of the business is project business. So when the customer wins a project, they need the products extremely fast. We need to have a lot of flexibility, fast deliveries. Typically, the most common items for the market are in stock, the low-value ones. But the bigger ones, like this huge bit in this picture, 1.4-meter bit, of course, is then a make-to-order which we start producing from the purchase order. What is the Robit competitive edge? In this kind of a niche business, true experts are actually quite rare, and we can really add value to the customer. We have pretty good proximity at the moment for the key markets. So we do benefit, for example, in Scandinavia, that our -- in freights and delivery times that our factories are quite close to the market. In the bigger projects with the newer customers, of course, references they play a role. And when you're one of the biggest players like we are with strong references, it's, of course, our benefit. Like I said, we have very strong distributors in this business with a lot of expertise, service capability and complementing offer. And actually, I think still today, the biggest distributor for Robit, in total, is a geotechnical distributor. So in certain areas, this business is a very significant size. That's piling, and then a few words about geothermal wells. Geothermal wells offer renewable energy, decrease CO2 footprint. And at the moment, here in Robit, we are focusing more in the Scandinavian geothermal wells as that alone is quite a big market. So in Scandinavia, 60,000 to 70,000 geothermal wells are drilled every year. The number is growing all the time. And actually, there's lack of drillers at the moment. Everyone is busy at the end of the year. So we evaluate that the geothermal wells in Scandinavia alone is a EUR 30 million market that we are now targeting. We have been in this market for a long time, but only with a pretty narrow scope of the product offering. And since the acquisitions, we've been starting to develop the full offering to offer for the drillers. So that is where we see a good growth opportunity. And as opposed to piling where we need to offer a pretty wide range of products because the designer basically determines what needs to be installed in the ground, in geothermal wells, in Scandinavia, we work more or less with the same standard of products all the time. So this is a good thing that we can attack with a pretty narrow product offering and high volumes into this market. So as a summary, what I would like everyone to remember for the geotechnical business, Robit is a strong player in the constantly growing down-the-hole piling business, and we see a good opportunity to grow in the Scandinavian geothermal business. Thank you.

Excellent. Thank you very much, Ville. Yes. All right. We have a couple of questions from the audience. Just a side note, I saw that there were a couple of questions on mining online in the chat, I'll save those also for the Q&A for our team, so they will be addressed at that point. Can we get -- I think the hand was up first here in the first row, please.

Yes. Its' Antti from SEB. You mentioned the cyclicality and the project aspect of the piling business. So how does that actually work for your distributors? Are they usually a very strong kind of a local player, so they are not very dependent on winning a single project and such? So how much volatility is there kind of for their inventory levels and the standard products that you provide for the distributors?

It depends. But mostly, we have quite strong and big-size distributors in this business. But of course, depending on the market size, there are different kinds.

So if I understand correctly, kind of the volatility for you is maybe winning or losing a bigger EUR 1 million, EUR 2 million project and kind of the more customized bigger products that you are delivering and kind of the standard business is fairly even compared to the market growth?

Yes. To be honest, there hasn't been a lot of volatility because anyway, there's a lot of rotating standard items all the time and this kind of EUR 1 million, EUR 2 million big one-off deals are kind of like addition. And we've been anyway be able to grow all the time. So I would say that it's pretty steady even like on a monthly basis for us and the distributors.

Okay. And then lastly, from the Scandi geothermal market. I mean what's your kind of market position? What's the competitive edge? Are you just seeing a big market growth potential? Or is there something to be done to strengthen your share in that market?

I think this is a very interesting market because it's extremely quality driven. So the contractors are small contractors. They typically need to drill one deep well on a day. So they cannot afford to take chances with their drilling tools. So like a high-quality product is extremely essential in this geothermal market. And I would say that the customers, that is their top, top, top thing what they think about when they choose their supplier.

Okay. And where are you in this process? Or is there still convincing to be done that you are a top quality provider? Or are you already there?

I would say that we are in a very good position at the moment with the process that we have. Our market share is growing all the time. And our name and brand is getting more known in the areas we haven't been before.

Good. I'll pass it on to still one short question from over there.

[indiscernible]. Coming back to piling. How tight is the competition there? And how much pricing leeway do you have? I mean if it's a specific business area and you're strong there, you should reap pretty nice margins out there?

Yes. The most -- there are some differences that in the bigger sizes may be it's different because not everyone can supply that sort of equipment. And typically delivery times and reference these sort of things play a bigger role. But in the smaller sizes, the more common sizes, of course, it's easier to compete, and there is more competition there. So the more common the product or bigger the market, of course, that's how business works. There's always more competition.

Thank you very much, Ville.

Thank you.

All right. Next, we will move on, and there's going to be 2 back-to-back presentations from Arto, again. He has multiple roles, of course, today. And we'll have a Q&A in between because first, Arto will be talking about the best-in-class service level and then the planning numbers, but let's get started first on the service level.

Thank you, Daniel. Tommi mentioned in the opening presentation that one of the key cornerstones for our strategy is to build Robit capability, to be able to provide best-in-class service level in this industry. So let's look a bit closer to the topic. So we are in service business. And in service business, availability, lead times, reliability those really are key success factors. And how we approach this, there are 3, let's say, main elements that we want to address. Firstly, flexible manufacturing capacity. We need to have capability to manage the peaks and valleys of the demand as demand is not always stable. Integrated supply chain planning, the whole supply chain from the customer side all the way to the raw material purchase, that is a long chain, and we need to master in managing that. And thirdly, offering management. We need to make wise decisions already when we design the products, we design our product ranges, manage our product offering. And obviously, that will then translate how easy/difficult it is to provide best-in-class service level and availability. So in this kind of a service business, we need to keep lead times short. And therefore, we have set the target for ourselves that -- or kind of guiding principles when we define our investment plans and define our kind of practices at the factories, that we need to have 25% flexible or free capacity to cope with the big demands. Because there are -- we are working in a relatively stable business environment, but still you have peaks and valleys in the demand. You win a new customer, you need to ramp up a new customer and then it can generate kind of a peak load at one given month or week. How do we do this is that I think one aspect is that we need to look carefully into our investment road map. So we don't get caught kind of having a shortage of machining capacity, same applies obviously to the supplier network that we have also the supplier network aligned with the plans. And then we need to have the flexibility maybe through shift planning, through flexible working arrangements at our factories that we can adjust the capacity if we see higher-than-normal demand coming. And kind of with these actions, we target to keep from the manufacturing units, our lead times for high-runner products in less than 3 weeks. Obviously, we then provide a kind of local availability through our sales entities, distributors in the world, but from the manufacturing units, which is the kind of the first stage, this is our target. 2021, we have done a lot of investments and are still implementing, and we will continue to do these investments in 2022 to be ready for the growth. Let's look more closely the expansions, especially on the top hammer side. So in Lempäälä factory, we did a study, end of last year, kind of really aiming how we can significantly increase the capacity from our Lempäälä factor. And now we are implementing the first steps of that investment plan. There are 2 product areas that Lempäälä is supporting and manufacturing, for the top hammer side, the top hammer bits and then the geotechnical products Ville was just giving a presentation about. This -- both of the product areas were previously on a one factory building. We have 2 buildings at Lempäälä. The other one was in warehouse use and the other one is kind of a production use. So what we are now doing is that we are moving the geotechnical production to the other building that used to be, let's say, the warehouse, and we have invested to free up the space to a new warehouse building. So essentially, we will have a geotechnical factory, and we will have a top hammer factor. At the same time, we are doing this move, we are also investing into more machining capacity. On the geotechnical production, we have invested into a new drilling cell and essentially on this kind of a key production stage, we are doubling the machining capacity. Similarly, on the top hammer side, where we have seen great growth, we freed up, as a result of this move, a lot more space for current and future growth. And we have done investments into new production sales also in the top hammer side, and we'll continue to do that in 2022. The Lempäälä investments will be completed by the end of this year, and we'll have the capacity up and running by that. And then you see still on the slide and on the top hammer bit production, this means more than 30% capacity increase already the investments that are under implementation as we speak. Korea factory is our another top hammer factory. Korea, this is a new factory established in 2018. And straight from the beginning, there was a kind of a long-term investment road map for the Korea factory. And this investment road map, we are now implementing as demand is growing. It's essentially producing kind of completing the top hammer offering that Lempäälä is manufacturing in Korea. We do drill rods, shanks and couplings. And essentially, the drill rods and shanks are the key product areas. They are on both of these. We are doing big investments to improve the capacity, increase the capacity. On the drill rock production, we are investing into a new friction welding machine and opening up a kind of [indiscernible] in the current production. And this will improve -- increase the capacity for drill rock production. This investment will be up and running beginning of 2022. Similarly, on the shank production, we are investing into a new machining tools and also kind of we are robotizing the -- or increasing the robotization in the production. This is, in general, kind of our principle is that in all of the investments we aim for high level of automation, high use of robots to kind of increase the productivity in our factories. And this is -- that's been one kind of a key aspect also in the investment on the shank production line in Korea. And we'll get more than 20% capacity increase for the shank production. On top of that, we built kind of a more supplier capacity close to the Korea factory. Another key aspect is this integrated supply chain planning. So as I was saying, the whole supply chain, let's say, from a mining customer at Peru, who needs to have the products available to local stocking in Peru, to transportation, manufacturing and raw material purchase, that is kind of a fairly long supply chain, value chain. And managing this chain is one of the most critical task and maybe even one of the most complex tasks in our business where we need to really succeed in order to be able to provide best-in-class availability. And we've been kind of on a journey to really master this process, and there's been a lot of development done already in the past years. We've been establishing processes for inventory planning, forecasting process. At the same time, we've been establishing, let's say, global planning team who is managing this process, working closely with the sales, to gather the sales forecast and to, let's say, manage availability on an item-by-item level. We've done investments on kind of targeted digital tools to make the internal processes more efficient, smarter and more accurate. And kind of most recently to this whole process, we've integrated the raw material planning, which is obviously kind of the last or the longest chain we have is that that's really an area where we need to succeed because if you fail in planning your raw material needs, then it's going to be slow to react if the demand is higher than anticipated. So that is really critical that it's integrated to the whole process. What we are doing next is that now we are doing investment into, let's say, state-of-the-art inventory planning, forecasting software that will support the process we already have in place, but we'll just make it faster, more intelligent, more proactive, and as a result, we'll get better results in this area. But really important area in this whole availability management. The third key aspect is our offer. So we need to do smart decisions already at the design table. And really, we are in a kind of a mass customization business, and we drive to have modular product designs. Here is one great example from the recently launched Rbit product series, which is our drill bit -- new drill bit series. In the -- well, let's say, if you -- in the manufacturing process, what you do first, you machine the body of the drill bit before the heat treatment, and after that, you'll drill the holes for the buttons and put the carbide patterns. And there can be different type of phase types, for example, depending on the application you are selling or you have different carbide grades. So kind of the product is kind of a configurable product in that sense. In our previous older product range, for each -- in this example, it's one-size-class product. For each of the different, let's say, configurations, there was also unique bit body, which was the first stage in the production. And obviously, it means that we need to -- if we want to provide fast availability, we would need to keep in this case 6 different blocks available and it has impact on the inventory levels and so forth. But now in the Rbit, the design is smarter and all of the kind of different configuration can be manufactured from one bit body. And also, the number of different configurations have been reduced, but still we are able to meet the customer requirements in different applications. And obviously, this translated into more efficient supply chain as a whole we can better manage our availability, we can provide better lead times. And these initiatives are really key in building this best-in-class availability in our business, and Rbit is one great example in this area. So as a summary, we target to keep 25% flexible free capacity to manage big demands. We develop -- continue to develop the processes, supporting tools for the inventory planning and forecasting. And modularity is key in driving our product design.

Good. Thank you, Arto. Let's pause here for a while, give you a bit of a breather and a bit of questions and answers. I'll first take 1 question from the chat that just came in. There was a question that are there plans for a European central warehouse for all product ranges in the future?

No, we don't have currently plans. I think today, from where we serve European customers is from Lempäälä factory or sometimes directly delivering from our other factories. But Lempäälä acts essentially like a regional warehouse for European customer needs and distributor needs.

Excellent. Thank you. Then can we have the mic over here in the front row. Thank you very much.

Yes. Thanks. Just a question on the kind of the capacity investments that you are doing. And I mean, you're seeing growth, the market is growing, you are seeking to gain market share. So obviously, you are in a growth phase. But how much of these investments that you are making is to kind of improve your flexibility and improve kind of the lead times and cash conversions and such. So what I'm trying to get is that, is this an anticipation of a stronger structural growth period? Or is it just improving your flexibility and kind of giving more kind of a leeway to those fluctuations that you are seeing?

I think there's both aspects included here. I think essentially -- let's pick an example, I guess, it's always easiest with that. Like, for example, when we do the investments in the shank manufacturing in Korea. As a result of the investment, we can do bigger portion in-house. And always when you need to do some stages, maybe outside of the factory premises, it increases the lead time. And as a result, obviously, the money is tied longer. So the fast throughput time is definitely helped with the investments. But there is a big component that these investments are really to build capacity for growth. And to be honest, I think we would have wanted to have some of this capacity online already earlier because we have seen very strong growth in Top Hammer. And therefore, these investments are meeting the demand we've seen already and building further capacity for the future growth.

And is this kind of the lack of this capacity previously is something that has led of losing business? Or is it just a slower conversion to revenues and cash flows?

Yes. Yes. Well, it's difficult to estimate. But definitely, I think you could say that we haven't been at our target levels when it comes to the lead times and so forth this year. And this is service business and sometimes, if you don't meet the customer expectation in terms of the product lead time, you lose business. So I would say, yes, there's been some business we have lost during this year because we haven't been able to supply as fast as possible.

Thank you very much. I'll have to stop us here so that we keep on schedule. We'll save your question for later. And also, I saw that there was a chat question on the Down the Hole versus Top Hammer growth. That's an excellent question that I'll also save for the Q&A in the end. At this point, I'll unleash you again on the [ plan on ] numbers. Thank you.

Thanks. All right. So yes, I'll try to conclude a bit what we have discussed so far and put some kind of numbers and direction behind that. So just as a recap, our financial targets. So what we are striving towards is this 15% organic growth annually and comparable EBITDA of 13%. And you see the development we've had, we've been trending the right direction, but we are not yet there where our ambition level is our long-term targets are. So how we plan to narrow the gap and eventually reach our long-term strategic targets. If you look at the key drivers for growth and profitability. Let's start from the growth. We've been talking here today about the distributor channel development. George talked that we have -- we already have -- we have recently signed a lot of kind of Tier 1 distributors for the mining industry as an example. And we have strong distributor network also for Down the Hole side and the geotechnical business. And we really believe that growing with the distributor networks with the distributors have been signed, who have been part of Robit for a longer time, we have a great opportunity and platform in place to capture the growth. This is a big lever for us. Then we have these 4 direct sales markets, Peru, South Africa, Finland and Australia. And those markets, we have strong sales team. We have experienced sales teams who have a track record of delivering growth, and we have high ambition in those markets to capture the potential there is. And this is really another big lever for the Top Hammer growth -- top line growth, sorry. One thing impacting top line, but more so impacting profitability is pricing management. And Robit has a very clear pricing strategy and there's no plans that we would change our pricing strategy. We are a kind of a challenger in the market and we base our pricing on the level of the -- a bit below the level of the market leaders. But then there are things you can do in master the execution in pricing, having really solid processes in pricing management, having data analytics, supporting the decision-making and partly also kind of the control that we execute, implement the pricing strategy as we have defined. And we have pockets there that we can improve. And everyone understands that pricing is a big lever on profitability. 1% on price more is 1% to your bottom line, and you don't need to do necessarily even big improvements and it has a big lever on the overall profitability. And this is something we have established what we call a commercial excellence center. They are driving the pricing management process, supporting sales, sales management, don't mean the decision-making and making sure we excel in this process. If you look then the main kind of the cost items, cost elements, materials and services is obviously the biggest. And there, we have 2 big drivers for profitability improvement. First is this sourcing savings, especially by increasing the share of cost competitive country, supply. We have had, let's say, traditionally fairly low share of CCC sourcing. We have a strong supplier network that we work with. And I think it's one of our assets today, and they are our long-term partners that we want to continue also in the future. But there is a certain share and as we grow, especially that we see great potential in CCC sourcing and as a result in improved profitability. Also to design to value initiatives. So basically, initiatives where we design a product that delivers same or better value for the customer, but it's maybe designed in a way that we consume less material or it's easier to manufacture. And as a result, the manufacturing cost is low. This is another big lever on improving the profitability and reducing the share of the materials and services on our cost base. And a lot of these, let's say, design to value or there are product ranges that have gone through this process that have been already launched and some of them there are still on the drawing board. But still, it is kind of great driver for profitability improvement. Then we have productivity improvement. Productivity improvement both at kind of the operational level, factory level as well as the white collar productivity. So as I mentioned, when we do investments, we want to have the kind of the best technology we want to have a high level of automation as possible. And as a result, kind of increase the productivity. And of course, each of our operations, they have their own plans in the day-to-day work to continuously improve productivity. There are opportunities in the white collar productivity as well. For example, when we were talking about the inventory planning tools that will make us more smarter, but also in a more efficient manner. And I think here also, I referred to this commercial excellence center that is really supposed to be kind of center of excellence supporting sales, making -- generating proposals easier, more efficient, more standardized. And as a result, we get the white collar productivity also increased. And then kind of lastly, this just general operational leverage. The platform we have, the kind of structure we have, we can still grow a lot with this structure. Obviously, we'll add some people here and there we do investments, but the cost base is not going to grow as fast as the sales will grow. So there is clear operational leverage that we can achieve. So from where we are today, the first half of 2021 to what is our long-term target. We have a clear path how we will achieve. This is kind of an illustration what gives a bit the scale, what do we expect from the different initiatives. There are obviously some temporary savings that have been there now due to COVID, less traveling, not so many exhibitions so lower marketing costs and so forth. And eventually, they will recover back once the world resumes more to normal. Still the path towards the 13% EBITDA is really solid, and we believe we have actions in place to achieve that and the strategy in place that we will achieve that. Investments we've discussed. So this year, we will make all in all, EUR 6 million to EUR 6.5 million growth in investments, especially supporting our Top Hammer growth, also investments on the geotechnical side, as was mentioned. EUR 2.2 million of these investments will be financed with financial leases and rest with loans or cash. And we will continue the investments in 2022 and 2023. The level will not be as high as it has been or will be 2021. So it will be less or at the level of our depreciations in 2022, 2023, which is less than what the -- the 2021 number. Also beginning of the year, end of last year, we did the decision to kind of prioritize service levels because we saw it was a very volatile market. Also one thing was that there was a rapid increase on the raw material prices. We wanted to hedge against those increases to, let's say, support our bottom line. And as a result, there's been an inventory increase during this year. But our target, when we talk about all whole net working capital is that as a percentage of sales, it will be less than 40% and will start to go towards the levels where it was end of last year as well. Time for questions.

Good, excellent. All right. I see that there we have 1 question from the audience online, and there's a question that what is the dividend plan? Do you plan to pay a dividend again soon?

Well, there's a kind of dividend policy that Robit has is that we pay 20% to 50% of the profit for the period. But there is always consideration if the board sees that there's, for example, growth investments where shareholders would get better value, then those can be prioritized.

Excellent. All right, please.

Coming back to your previous presentation about the capacity dynamics, is it so that -- because you said that you run about 25% of a slack or free capacity. Is it so that your closest competitors have the same type of capacity, or free capacity? Or is it so that also the big ones have free capacity or do they generally run pretty much higher capacity utilization rates than the smaller ones too?

Yes, I can't really answer for fact what are the big guys doing. But obviously, our target is to be best-in-class service level in this industry because that's one way of winning business, definitely. And on one great opportunity to win more business is when some of your fellow competitors face. And we want to be there to get the business at that point. And that's why we want to have best-in-class availability to maintain the customers we have, they stay happy. But also to have opportunity or be able to capture the opportunities that come because really, we want to grow. And this is big driver for growth.

Continuing on that, if you want to have the best availability, can you avoid your situation of being kind of gap filler. So that leads to volatility -- high volatility in your capacity?

I think, I wouldn't call this strategy that we would be just a gap filler. But in some cases, when you enter to a new customer, you might need that chance that you prove your product. And you get that, okay, then Robit gets in, customer gets experience from the product, finds out that it's a quality product, brings value to the customer. And then you are in a whole new kind of discussion with the customer that you can tackle the whole spend or be the #1 suppliers. So I think those are just door openers in a way. But definitely, our -- we are not a gap filler that, that would be a position that we would stay in. But they can open the door.

Good. Thank you very much. I'll need to move us on, unfortunately. I will take your questions then in the questions and answers. Thank you for the journey so far. I think it's been great and really, really great presentations from the team so far. What we'll do now is that we'll have Tommi Lehtonen giving us the way forward. And after that, I'll then give us some notes on the questions-and-answers session that will run then for about 20, 25 minutes afterwards. But at this point, the presentations will be ended by Tommi Lehtonen, please.

Thank you, Daniel. So looking a little bit summary and way forward. Again, looking at, of course, the core targets for Robit, the 15% organic growth and 13% EBITDA and EUR 200 million , big goal, 10% market share. So I hope these presentations today a little bit opened up our plans, how we plan to achieve the targets. We are kind of confident that we see the path, we have clarity on how we are going to do it, it's more about quality of execution now for us. We are aligned in the organization. As you see also, between the presentations, there is a pretty strong alignment. And as an organization, we have alignment for these plans. So really focus is on quality and quick implementation currently. So just to summarize. Really, our aim is to capture the full potential of the platform we have built. If you look at the market demand, of course, it's always a foundation of a business. Is the customer demand. We have a great position in that way. We have 5% market share in the EUR 2 billion market, which is very stable in demand by nature. So it gives us a good space to develop our business in. We have a strong global team and a platform that gives us the foundation for driving toward our targets. Again, we focus on our research and development agenda to ensure that we achieve our targeted best-in-class value. I got really nice feedback last week in Las Vegas for our products. We are really confident with the offering we have. We have excellent and scalable supply chain. So while we grow actually kind of the operational leverage truly is there. We can get a lot out of these walls, a lot more out of the walls we have. And we are building our capabilities towards our target of best-in-class availability. We still have plenty of profitability improvement potential. You saw the kind of themes we are working on related to -- okay, of course, top line leverage is there, but additionally, the margin improvement. When we'll talk about the fixed cost as such, our current fixed cost level allows us still to grow and step-by-step only, let's say, probably around 10% growth easily with this fixed cost level. And then we'll start to gradually increase our resources, but not at the pace of top line. So as an organization, we are focused on quickly, urgently moving the company where we are today which is, let's say, good trend to actually having a good performance. This is really that we are not satisfied with just having the good trend. Now it's really the ambition and we are eager to start to deliver a proper performance as well. So that's to conclude our today's presentation. And hopefully, thank you for taking the time. And hopefully, this really opened up a little bit our plans, and it was also really nice to introduce some of the Robit colleagues. And I thank also them for great presentations.

Excellent. Thank you, Tommi. Thank you, the team for great presentations. Good. Now what we'll do is we'll break for a short 10-minute technical break so that we can set up the questions-and-answer session. And at that point, of course, the audience again here has the advantage of just putting up their hands. I've picked out already about 8 questions from the chat that we'll discuss. But you also have a chance of calling in. So you have the numbers there that you're able to call to and will be able to actually hear your voice, which is always great and present questions to the team. Thanks so much for the journey so far, and we'll see you in 10 minutes. Thank you. [Break]

Excellent. Welcome back to the Robit Capital Markets Day. And hopefully, we've got the online viewers still with us excited for good questions and answers and of course, the crew here on site. Thank you very much for still staying with us. I believe we have -- we don't have currently any calls on hold. So you still have an opportunity. You've got instructions there, if you want to call in, would be great to also hear your voices. But I believe we have quite a few good questions already that we can get at this point. But -- and the team will alert me if someone is calling in, and we'll get to that then as well. But at this point, there were some questions, and I'll try to take this pretty much kind of like in the sequence as the presentations were. And the first one would be going to Tommi, and this is a bit about personnel. There was an observation that personnel has grown a little bit. Where have you added personnel and what is the personnel turnover? And also the continuation then that how do you keep the best drilling consumables specialists working for Robit and not moving to competitors? But if we start with the addition of personnel and the turnover.

The turnover of our personnel recently has been somewhat below 10%. So I would say on a normal healthy level, as such. And if you look at where we added personnel, okay, we have added selectively sales personnel like [indiscernible] here as a very good concrete example. And that we kind of do continuously, but it's very selective work. So if we have some good qualified salespeople available, we are always looking into that. Also, we have had a little bit resources to manufacturing. And now -- so it's kind of a selective mainly sales-focused customer frontline focus when we add personnel.

Maybe just one thing to add that when we look at the end of June number, we always have summer trainees in the number, and that increases the number of it -- that we see. So not all of the kind of the additions are permanent positions.

All right. And I think there was a good continuation question of that. I mean, we talk a lot about consultative sales and us having the best teams, how do we keep the best talent?

Yes. I think Robit is an exciting place to work for, right? We have a nice team, focused professionals. So that's, of course, the fundamental. What's the company culture? Are the plans credible that you believe in what you do, right? Purpose is the biggest thing for people. And of course, while we've been trending positively, it gives positive energy to people and want to participate. So I think people want to participate in something that makes sense, have a purpose in their life, and there is no frustrations because I don't understand what we are trying to do. I think that's really the key element. Of course, good incentive plans and so on and so on. But really, the purpose is a big thing and the company culture to me.

Excellent. Very good. All right. Then we'll move on to another one that was during your presentation, actually, Tommi, about acquisitions. What is the status of the integration of the acquisitions made over the past few years, especially Halco? And have the expectations and targets for the acquisition have been met, what would you say?

I mean all the acquisitions are fully integrated into Robit. They are part of our global organization. So the organization is not based on, for example, the legacy companies for a long time anymore. Integration has been done. Naturally, for top line, we haven't met all the targets for initial targets, targets for the acquisitions. But I would say, still the fundamental target, which was the expansion of the offering has already provided us quantifiable results. For example, the key distributors we sign really appreciate the fact that we have this comprehensive offering for them to add back all the needs of the mining customers. And again, looking at the market potential that we increase through the acquisitions, we almost doubled the market potential.

Good. Thank you. All right. Then I think we could actually move a bit to the crowd here. Did I understand that maybe Erkki from Inderes had some question on sustainability that I rudely broke off. Do you want to possibly make that question? Please, the microphone. Yes.

I could actually, yes, because you talked about kind of expanding your scope on ESG. How easy is it to get information from your suppliers regarding their sustainability? And have you already identified suppliers that clearly need to improve or are at risk of being replaced?

Yes. I think as also mentioned, we generally work with long-term partners also on the supply side. And I think there's been common understanding on these aspects for a long time. And some of our suppliers might have even higher kind of ambition levels than we do. But still, I think, to be fair, we are still -- the road map we went through, we are kind of early stages in starting to implement that. And I'm sure we will find that it's not all that smooth, right. And there might be some decisions we need to take as we go down the line.

Good. Then I think we'll turn back into a question that was in the chat, and this would go into George's presentation. And there was a question a bit about mining versus construction that we talk about. Do we see more growth in mining versus construction on a global basis as we are focusing more on mining today? What do you think?

I wouldn't say there is more growth. I wouldn't look at it like this. But Mining as -- I tried to explain a little bit earlier on is a little bit more stable environment. It's a stable, more stable platform for us to especially increase market share. Construction that we know, for example, in cases like COVID now, I mean we know certain governments having stimuli programs for their economies and they spend, there is expenditure. But in a nut shell, mining, in my opinion, is more sustainable compared to construction business.

Daniel, if I may add a little bit. Of course, we see construction as well as an opportunity. And there are these big investments from governments going on and a lot of funding coming to construction. And we are there also to look at capturing those opportunities. But mining is kind of the nature of our business, again, we want to emphasize the fact that for our product, the demand is really stable. So that creates kind of a foundation, continuous foundation for us and potentially speak, while we are then more opportunistic looking at these construction opportunities.

Okay. Good. Thank you very much. Then a bit still staying on the topic. There was a comment that mining is a very consolidated industry or it can even keep on centralizing to some key players or big, big players. How would you comment and we'll start with, George, on Robit's dependence on a few key customers and how do we ensure continuity of contracts?

Yes. Consolidation is a fact. I mean, it happened and it continues to happen. But I think we're pretty independent when it comes to our business. We spoke to the mine level. I mean, we -- this is where we do our sales, and this is where everything takes place for us. It's the mine site. So the consolidation happens in different rooms we're not necessarily present. On the question about contracts, how we...

Yes, how do we ensure the continuity of those contracts? Are we able to win them over again?

It's -- I think since we're present, this is being locally present with strong distributor network with direct markets, experienced people, if we're always present, then we make sure that we continue these contracts. This is the only way forward.

Okay. Tommi?

One quick addition maybe that the largest customer of Robit is clearly below 10% of our net sales. And our customer risk as such is pretty well under control.

Good. Thank you. Then this one going to Tommi, and this is a bit about the different SBAs. Why is the DTH not growing as fast as the Top Hammer and at 15% a year?

Yes. I believe we are further in our globalization journey with our Top Hammer product. So Robit has been working on multiple markets for a longer time. It's not like we are in the beginning of our journey related to mining Down the Hole. Actually, we have been taking steps already during this year. For example, the growth outside of Australia for our Down the Hole mining has been fairly good. And we are kind of taking the first steps to globalize that business as well. And again, we are further down on the road, but we have a good plan also in place for Down the Hole.

Excellent. Thank you very much. Then I actually believe that we had an audience question, which I also interrupted the discussion on the service levels. Did we have a possibly from Erkki again, something on the service levels? Or did you get an answer already? I believe you keep good notes. So...

Actually, it was not about service. It was about [ groups piling ] maybe, but...

That'll be a great question. Ville haven't gotten to answer yet. So please, something on piling?

That's already been asked as well. So skip me for the time being.

Okay. No worries. Thank you.

Can I ask a follow-up on the [indiscernible] Australia?

Yes. No, definitely. Let's get the microphone over here.

Yes, that was mentioned at the Down the Hole growth, excluding Australia has been good. So just an update, what's the plan for Australia going forward? How to get that to support growth and get to double digits?

Yes. I mean, again, you've seen that we've taken some steps in Australia forward. And it's about building a team further a little bit stronger. And continuing on kind of a solid sales management plan we have. We have already hired very senior industry people in our organization. And they've been working there, let's say, 6 months' time, the new team. And okay, it progress is starting to come true, we continue to work on that part, but at the same time, to have a solid sales management process in place to drive the growth.

Good. At this point, I look at the team. We didn't have anyone on the calls at the moment right now. Okay. All right. Yes. But then the first row, we have some questions here, please?

Yes. This is Tom Skogman from Carnegie. I would like to ask, do you buy steel and special steel grades from Sandvik?

Well, we don't comment specific suppliers that we are using.

But I mean, it's kind of a big business risk if you are really dependent on getting steel from 1 of your main competitors. So do you have alternative suppliers? Or are you really dependent on Sandvik in that sense?

Well, that I can answer. No, we are not dependent.

And then I wonder about this growth agenda and the investments needed. Will CapEx be -- could you give some kind of a rough indication how CapEx will be compared to depreciation in order to grow by the 15% that you target will the depreciate level just grow and grow and grow all the time or what will happen?

Yes. So this year, we had a bit higher investments, and it was partly related that we need to kind of restructure with the layouts in Lempäälä and get this new factory building in use. Going forward now, if we look kind of the strategy period, but we will do they will be just bottleneck. We don't need to invest into walls. We need to invest into [indiscernible] machinery, maybe some automation and so forth. So the CapEx level will be below the depreciation.

Yes. So CapEx will now -- from now on basically be lower than depreciation. So the shared decision will go down. But I still want to kind of what -- you don't have any target for return on capital employed or so. But if you want to be a growth company and it's a capital-intensive industry, you have a very large net working capital compared to sales. So what kind of levels or return on capital employed do you think you should be able to reach when you are at your kind of target levels?

Yes. Well, that's obviously where we haven't given out any public targets. And I'm sure you have also good analysis to throw where this is driving, but on the net working capital is where we aim that we are below 40% level. And we've been now first half of this year, we were above that level. So that's where we target to free up capital all in all. And then with this 13% EBITDA, it will drive us to a certain return on capital levels.

And a comment on...

There's maybe a little bit of repetition. I just want to highlight the fact that we actually looked at the inventory levels already end of last year and we saw the challenges related to logistics the challenges we had a little bit related Top Hammer capacity. And we really prioritized for short term, it's better to ensure availability and maintain our customers and accept slightly higher. So it was a conscious decision to do it.

Good.

Have you considered starting to report volume growth because the steel content is, of course, very high and that goes up and your sales go up and down with steel prices, et cetera. So I think it would be good to get volume numbers somehow.

Yes. Well, not something we have considered, but it's a good point in that sense. But let's say, if you think the market price dynamics in drilling consumable business, you can't directly read it when -- if you look how is the steel price fluctuating, it's not like that the steel price changes would straight away immediately go to the drilling consumable market price levels when the raw materials go up or raw materials go down. So the dynamics are still a bit different.

Yes. So that was kind of my next question. Where do you think -- where are we with pricing against the input costs at the moment given iron ore has collapsed, but steel is still pretty high. It's very hard to get an insight into your, of course, contracts, what you have and how long do you agree your input costs ahead?

Maybe Arto, you can comment a little bit, I can comment based on it -- about the raw material prices for us.

There are different kind of contracts in place on some of, let's say, if you talk about the raw material, let's say, the fluctuations come faster on some we might have fixed pricing for a year, some might be quarterly changing or things like that. It is a bit mixed bag. But whatever the changes are, there is still kind of slowness when they start to be visible or start to realize in that sense. And that gives us kind of visibility to take actions then especially in this kind of a market where everyone's input costs have gone up, meaning that the market price is going also up. So it gives us time to implement changes then on the other part of the equation.

Yes. Just to confirm the comment there that all the suppliers in this situation have made price increases. So the market cost increases have been transferred partially to the customers already.

And then this is kind of perhaps a pandemic question that your -- at least 2 of your competitors have very large organizations globally in place while you are in most markets, as I have highlighted, dependent on distributors. Do you think it has been an advantage or disadvantage? And how do we get out of this? Will there be kind of dynamic changes?

Yes. I think it may be not at least, I don't think it's a disadvantage for us. Actually, I believe it's an advantage because our distributors basically are looking at the single country their president country. And as we know in this pandemic, basically the difficulty came from traveling from country to country. So in those local markets, when we have mainly persons are serving customers in their country, we've been able to continue to serve our customers on a good level. So local presence to me has been an advantage.

And then the last question, perhaps about this ESG. So I didn't -- I think it was a good question that was put here about what happens to the drill bits. I mean, it's only like, I don't know exactly, but I assume is like 10% that is kind of disappearing of the weight and 90% could be fully recycled, and just put back into your factories and then you put on the top again or?

Tommi, please.

Yes, I think if you look at the whole mining process because we are a small part of a mine, right, the drill bit, there's a lot of metal consumables used in many, many, many tons in the mills, crushers and so on in much, much higher volumes than our part. So for sure, mines are geared up for metal recycling as such, it's clear.

But it's not possible just to replace the critical part and change the business model long term or?

So what we do is that we reclined. So you can service the drill bit and you can extend life of a drill bit. So that is what we do to extend the kind of the lifetime of a product.

It's [ recoiling ] the carbide. With that, you can extend the lifetime of the bit but not the body itself.

Good. Excellent. I believe we then had a question over here, please. If we can get the mic, so then the online audience gets to hear the good questions as well.

Still about the industry consolidation. Is there anything fundamental why Robit itself would not become an acquisition target? Or do the customers like your independence so much that they wouldn't be pleased if you became a part of a bigger entity?

Yes. I mean, of course, we cannot talk about other people's plans, right? There may be somebody taking a proposal. And of course, that's kind of a possibility always. And I believe customers like the way we are today, you are right. That they appreciate the fact that there is some focused independent, drilling consumables company. It's nice in this business that the drilling consumables decision, clearly, like a culture of the industry is that it's a separate decision from the equipment. So -- and that kind of supports our position nicely. And my opinion is that customers appreciate that we are independent.

Good. Do we have any further questions from the audience here? I think it's been great discussion so far. And looking at the technical team, we don't have anyone online either. All right. Good. I think then at this point, it's -- we are coming to the end of our event. Thank you to the presenters. It's been great working with you.

Thank you, Daniel.

And thank you to the audience here. A couple of comments. First of all, if there still are more questions, you can address them to [email protected]. And also, we will make a recording of this event available on our company website. At a later stage when we've gotten it actually uploaded there. At this point, I would shortly put it that it's exciting to be on this journey together, and thank you for a great event, and thank you, everyone here. Thank you, and goodbye.