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

Welcome to Sandvik's Virtual Capital Markets Day 2020. Thank you all for joining us today. We're looking forward to spending the next few hours with you. I'm standing here on stage with our President and CEO, Stefan Widing. Welcome, Stefan.

Thank you.

So the overall strategy and targets will remain the same, but we are now shifting to growth. We are excited to hear you talk about it. But before we do, I would like to cover some practicalities. At Sandvik, we always put safety first. We always strive to make sure that all environments are safe for our employees and our partners. I trust that you are safe now and that you know the safety routines of where you are located. We, for sure, know what we would do if something happens here. So with that, let's move on to today's agenda. We have a full schedule today. And you will hear our CEO, our CFO and all the business area presidents, talking about how we are positioned as a company and how we will now shift to growth. [Operator Instructions] And you can also write your questions in the field below the webcast. We will address them if time allows. And if not, we will get back to you offline. So that's it from me. Over to you now, Stefan, to start.

Thank you, Emelie. Also, I would like to welcome you to Sandvik's Capital Markets Day here in 2020, a virtual event. My name is Stefan Widing, and I joined the company as CEO February 1 of this year. Sandvik today has world-leading positions in a number of different businesses. And we will spend today going through each of them and how for each of them we are shifting focus to growth. Henrik Ager will take us through Sandvik Mining and Rock Solutions, a business that you will see today is a true world leader when it comes to financial performance in its industry. We will, of course, continue to develop this business in the same way as it has been done in a great way in the past couple of years, and Henrik will talk more about that. Then we have Anders Svensson, that will talk about our Rock Processing Solutions business, a business that, starting January 1 of this year, will become a new business area. Then we will have Nadine Crauwels coming up on stage as well presenting the new -- the new segment, Sandvik Machining Solutions. Nadine took on this position as of October 1 of this year. And this is a business where we will even more so focus on ensuring that we will grow the business going forward, and Nadine will talk about how we will do that. Then Lars Bergström will present Sandvik Manufacturing Solutions. Manufacturing Solutions being still a small part of our business, but an exciting area where we see good potential for growth going forward. And Lars will explain more about that. And then finally, Göran Björkman will come on stage and present Sandvik Materials Technology and the exciting journey that they have in front of them in the next couple of years. Sandvik has had a successful strategy in the past couple of years. This strategy has led to a company with strong and leading businesses, being #1 or #2 in basically all areas where we are operating. There are still a few areas where we are not meeting this. But it is for good reasons, typically, because we are investing to reach that position. We have also been on a successful decentralization journey, where step-by-step, we have decentralized the company. And although we still have a way to go to be fully ingrained into our culture, we have come a very long way on this journey. This has led to increased performance. You can see it in our margins. It has also allowed us, in this downturn, to prove a very different kind of resiliency than we have seen in the past. We have also continued to work on sustainability, safety and compliance. Areas that has been an important part of the Sandvik culture for quite some time. Now going forward, we will keep all of these things with us, but we will increase the focus on a number of new areas. We will increase the focus on growth, first and foremost, both organic and through M&A. We will increase focus on digitalization and how that will impact our company, both how we run our internal operations, but also how we go to market and the products and solutions that we are offering our customers. We will also shift even more towards sustainability, both again how we do this internally in our own operations, but even more importantly, the solutions that we can provide to our customers to help them become even more sustainable. And then we will focus also on agility, also going forward. While we have shown very good resilience in the past quarters, there is more to do. And now is the time to start to work on ensuring that we are even better prepared for the next downturn whenever that may come. We launched 1.5 years ago on the Capital Markets Day in May last year, new financial targets for the Group. And this will remain the same. We launched a growth target of at least 5% through the cycle. If we look at how we have performed over the past cycle, roughly from the beginning of '16 to the beginning of '20, we have had a CAGR of around 3%. So clearly, we have not met this target in the past. Clearly, we have more to do in order to achieve this. You might ask how can we say that we are shifting to growth when we keep the growth target the same. Well, again, we haven't met this target in the past, and we launched it 1.5 years ago. It's fair to say that since then, we have mainly been playing defense with an industrial cycle starting to decline mid last year and then the corona situation on top of that. So we believe that this is now what we need to focus on to achieve this target. If we can prove to you that we meet this target, we're happy to come back here and revise it in the future. But for now, this is the target we're working against. We have a trough margin target of at least 16% on a rolling 12-month basis. This target we are delivering upon. We are currently, after Q3, despite the crisis we have been through, sitting at a rolling 12-month EBIT of 16.8%. So this is a target that we believe we are meeting. We will have about one quarter in front of us with tough comparables, and then we will come into a period with easier comparables again. So we are confident that this is a target that we will continue to meet also going forward. Then we have a net debt-to-equity ratio target of less than 0.5. We have a very strong balance sheet today. We are nearly -- or essentially debt free, which means that we have -- currently, we are here at 0.05. So well -- we're in this target. This, of course, also means that we have significant firepower when it comes to meeting and delivering on our growth target from an acquisitive point of view. And Tomas will come back to that later in this presentation, what we see there in terms of our financial firepower. Then we have a dividend target of 50% to earnings. Up until and including 2019, we were at 44%, so basically at target there. Provided that there will be no dividend this year, of course, the achievement here will go down. But it is important then to say that the target over a cycle of 50% remains. If we look at this overall, and we know also that we have done the announcement related to SMT, we also said when we launched these targets that, if we separate SMT, we will have to review these targets again. And that is, of course, true. We could today do a mathematical calculation of what it would mean, but we prefer to come back to you when we are closer to a spin and then revise the target based on where we are at that point in time. So we will come back to that in that situation. But I want to continue to talk a little bit about our resilience. It's important to not diminish the performance of the organization and the achievement of the organization here in the past couple of quarters. We have been in a situation where our top line dropped at the same level as during the global financial crisis. At that time in our history, we went into a loss. This year, we have continued to deliver above our trough margin target. We dropped below 16% in one quarter. But on a rolling 12-month basis, we are continuing to stay above. Now as late as April of this year, I got a lot of questions regarding how will you deliver on this target. I'm not getting those questions anymore. So I think you agree with me that we are delivering on this target now. I hope also that when we are through this COVID situation, we will have shown to you that we can, once and for all, leave the ghost of the financial crisis behind us. This is a different company than it was back then. And there are many reasons for why we have achieved this now. Of course, we have improved the business overall in a structural way in many areas. We have divested some underperforming businesses that typically tend to underperform even more in a downturn. But the most important reason is that we have been agile and quick and determined with our decision making. That, in its turn, is a consequence of our decentralized operating model with accountable divisions that take decisions quickly, close to their customers. Already back in 2019, we launched the first savings program, announced a savings of SEK 1.7 billion, affecting quite a few people in the organization. Some of that were delivered in 2019, but most of it came into effect now in 2020. Then when corona hit, we added quickly, a number of temporary savings to this. We communicated SEK 1.5 billion in total. That we have overachieved upon, like many other companies, simply because the discretionary spend came down much more than we had anticipated. And at the same time, we launched a new long-term savings target of SEK 1.3 billion that we are now executing on, and that will start to come into effect in 2021. When you look at this, you will see that we are not only managing the short term situation, but we are also preparing the company and setting up the business for profitable growth going forward when the market starts to come back. We also launched new sustainability targets last year, with additional focus on circularity and our CO2 impact. These targets are, of course, really important for the planet and for our people, but they are also good for our profits. We will ensure that we do our job internally to take care of our own operations. But the main impact we can have as a company is in the products and the solutions that we provide to our customers. In some of our businesses, it's an order of magnitude increase in the impact we can have at the customer versus what we can do ourselves. So that is really important. And we have here a couple of examples. We have, for example, in Kanthal, where as part of their offering, they are converting gas furnaces to electric furnaces. And so far, this has saved 170,000 tons of CO2 for our customers. We have another example in Svedala, in our rock processing business, where we have over 90% of reused steel in our large crushers. This is benefiting, both us, and our customers, both from a cost as well as from a sustainability perspective. As I said in the beginning, I joined the company in the beginning of the year, and I'm happy that I got about 6 weeks of uninterrupted and intense travel before the COVID situation started to cause lockdowns. I used this time to travel around in the company, meeting basically all of our divisions and visiting several of our key sites. Then, of course, this has continued virtually since then. What I have found is a company with a very strong culture, with passionate people that are proud to work for Sandvik. I have also seen a company that have done tremendous progress in the decentralization journey, and we have come very far on that. And I have also seen the portfolio cleanup that has been done, has resulted in a company that are in leading positions in basically all the businesses that we are operating in. If I conclude this, my conclusion is that we have a very solid platform to start from. And that platform, we will now use when we shift to growth. When we look at this, of course, we need to ensure that all of our businesses are in an environment and have the best possible circumstances to maximize their potential. And when we do that analysis, we have come to the conclusion that for SMT, the best thing for them in the future will be to be separately listed as their own company. SMT is a world-leading company in its niches. It's a world-leading materials technology company. They have improved their performance significantly in the past couple of years. And both through that and through the way they are now managing through this crisis that we are in, they are in the process of establishing a track record and proving that they can stand on their own 2 feet going forward. Then there are a number of reasons: strategic, operational and financial, for why we believe this is the right thing to do. The one I think is the most important, from my perspective, is the capital allocation. No matter how well SMT performs, we will never be able to get away from the fact that the returns will be lower than the other Sandvik businesses that are operating in the different industries, with different conditions. So when we talk about capital allocation, there would always be a risk for SMT that they will not get the capital they need to develop and grow in the way that is good for them. So that is why we believe it is the right thing for them to become their own company going forward. So this is now the journey that we are on. You could say it started last year. Some would say it probably started a decade ago with countless analysis and discussions internally. We did announce last year that we are starting the internal separation. This was now concluded at the end of quarter 3. Now we have taken the decision to proceed towards a separate listing. We will spend the next 12 months, building the organization and the systems that they need to be able to operate as a fully independent company, still within the Sandvik umbrella. Then the need to operate in that way for a while to be ready for a listing, which we are aiming to happen then in 2022. Now I know that basically all of you believe that this is the right thing to do. I also know that some of you think that it should happen faster. Let me then say this, that we are not dragging our feet here. We are doing this as quickly as we believe it's reasonable to do, given the complexities of carving out the 160-year old relationship, given all the stakeholders that we need to be with us on this journey to make this a successful separation. And we believe that the successful separation is going to be the right thing for shareholders of both the new SMT company and the remaining part of the Sandvik Group going forward. We have a long-term perspective on this, and we're going to do the right thing. If we now take a step back and start with how is Sandvik looking today. We have our SMRT business, which again, has performed extremely well in the past couple of years. It's in good shape, and we will continue to develop that in a positive way. But we do see even more potential in the rock processing part of the business, which is in a separate part of the value chain compared to Mining and Rock Solutions. We also see Sandvik Machining Solutions with a very strong core and cutting tools, but also a business that needs to grow more. We also see potential in the adjacent manufacturing parts of that business that need dedicated focus and specific skill sets to be successful. And then, of course, we have SMT that we have just talked about. So this is why we are now evolving the structure of the group to position ourselves for growth. Sandvik Mining and Rock Solutions, as I've said, they will continue on the successful journey that they have already been on for quite some time. Rock Processing Solutions, here, we see additional potential for growth that Anders will talk about later. And we have renamed them the business area SMS into Sandvik Manufacturing and Machining Solutions, still at the top level, the same business area. But we are creating 2 segments in that structure, one focused on Machining Solutions and one focusing on Manufacturing Solutions. And then we have SMT that is now starting its own journey. When we split SMRT, we are, in fact, creating 2 world leaders out of one. And we believe we have the potential to release even more of the potential in these businesses through this change. These 2 businesses, again, are addressing different parts of this value chain, with SMR being in sort of the rock extraction phase or upstreams in the mining value chain. Here, they are a true world leader and as you will see also from a financial as well as from an innovation perspective when Henrik presents. Then we have our Rock Processing Solutions business, which is today one of the world leaders in crushing and screening. We believe there is more potential to grow in that specific part of the value chain, but we also see other potentially attractive niches downstreams in this value chain that we want to grow into either organically, through partnerships, through joint ventures or through acquisitions. I want to be clear on that we are not aiming to become a full solutions provider in this space. But there are other niches that we feel are attractive for us and that we will explore in this space. We are essentially then doing the same thing with Manufacturing and Machining Solutions. Here, I think it's even more important to have dedicated governance with specific models for governance and specific skill sets because of the different nature in these different business segments. Machining Solutions will, of course, continue to focus primarily on its core of Machining Solutions. But they will also add larger solution sets, especially into the product preparation part of their business, as we have seen, for example, now with the acquisition of CGTech. Manufacturing Solutions will address a wider part of this value chain, including additive manufacturing, which is, of course, a potential substitute for machining. Here, it's important to say that we have not fully defined at this point exactly what areas we will go into. We have come to the conclusion that there are areas we will not go into, for example, 3D CAD, or when it comes to metrology. Metrology outside of industrial metrology. But there are still areas that we could consider gray zone, that we will explore. We might consider acquisitions or we will not, but that will develop as we go. Sufficient to say that already with the things that we have defined as in scope, we see significant market potential to grow and we will come back to that later today. If we now look at what we will have, once we have concluded on an SMT spin, then, we will have 4 different businesses where you can see here the underlying market growth that we forecast in these businesses between 2019 and 2025. So we should realize that in this period, we also have then the COVID -- a period of the COVID declines that we expect to have recovered then in 2025. So for Mining and Rock Solutions, we expect an underlying market growth of 3%. For Rock Processing Solutions, with a higher mix of construction, slightly lower, 2.5% to 3%. Machining Solutions, we expect to grow by about 2% CAGR during this period. This includes then both tailwinds and the headwinds that will come in, for example, automotive, as we will explain later today as well. And then in Manufacturing Solutions, again, for us, a small base to start from, but with very good growth potential, a growth of the underlying market of at least 10% going forward. This then will lead to our target of growing by more or at least by 5% through a cycle. So if you add this up, you will, of course, realize that we need also to add the acquisitive growth to meet this target. If we look at how we have fared here in the past, if we look between 2016 and 2020, we have added about SEK 2 billion in acquired growth. We have announced another SEK 600 million of acquisitions that haven't closed yet. So roughly SEK 2.5 billion plus in acquired growth over this period. Going forward, our target is to grow by 2.5% per year through the cycle through acquired growth. If you translate this and you exclude then SMT, this would mean SEK 2 billion to SEK 2.5 billion per year added through acquisitions. So clearly, a significant step-up from achieving that number over a 4-year period in the past. So here, we need to step up our game. We have already seen, and Tomas will show you that it's not really a matter of money. We have the resources to get this done. We also need to improve on our acquisition process, be even better on working with the pipeline and eventually closing targets. We will also work on our integration capabilities, ensuring that the companies that come in to the group continue to perform at or above the historical performance. But most importantly here will be to ensure that this becomes ingrained into our daily work. It should be a normal part of doing business. Our divisional leads, our BA presidents should go to work every week, driving acquisitions forward, realizing that this is a key part of achieving our growth targets in the future and also the way we will measure how we perform. So how will we make this happen? How will I make this happen? Well, we cannot do it -- I cannot do it alone and neither can my management team. We will make this happen through our 23 divisions. This is how we truly leverage the power of the decentralized operating model. When each of our 23 divisional presidents and our 23 divisional management teams wakes up every morning to deliver on our growth targets, on the acquisitions, on the shift to digitalization, on the shift to sustainability and working to ensure that we are even more agile in the next downturn, then we will make this happen. So if I summarize this, before we go into the details in each of these areas going forward here. Our overall targets and strategy remain the same, but we are shifting the focus to some specific areas where we need to step up our game. We have shown great resilience in the past couple of quarters, and we will continue to be agile and we will continue to work on ensuring that we are even better prepared next time. We have a very strong foundation that we have built, and we will use this strong foundation as we now shift to growth. This is one of the reasons for why the structure is evolving, to increase the transparency and to increase the focus in capturing these growth opportunities. And we will make this happen through our 23 division leveraging the power of the whole Sandvik organization. I will pause here for now, and now we will dive into the numbers. So I will welcome our CFO, Tomas Eliasson, on to the stage. Tomas.

Okay. Thank you, Stefan. So what we will do now is to jump into the numbers. And we're going to do a financial overview of the last 5 years, 2016 to 2020, and talk about what has happened. And not the least, how we have dealt with the COVID-19 situation and the impact on our business. We will also talk a bit about what is happening going forward. And we will go a little bit into some more details than we normally do during a quarterly presentation. So let's start with the top line here. On the left-hand side, you see the revenues. And we actually did peak at the end of 2018, early 2019. '17 and '18 were 2 really, really strong growth years. It doesn't really show in the numbers here on the left-hand side because we had very strong positive currency effects in 2019, which sort of covered up the numbers a bit. But if you look at the red line in the graph, in the left-hand graph here, you see the organic rolling 12-month revenues. And you can see how it starts to sort of fade out and decline already from the first half of 2019. This is very clear. On the organic growth chart, on the right-hand side, you can see the very strong growth numbers in '17 and '18. But you can see early 2019, growth started to come down. And we felt that in our short-cycle business very clearly. And we kicked off a major cost mitigation program already then, which impacted 3,000 of our employees, around 7% of all the employees in the company. In June 2020, we had a -- sorry, in '19, we had a really, let's say, really big negative numbers in some divisions. And the whole group was flat, and then it started to go negative. Then the second quarter 2020, we had the big impact from the COVID-19. It was kind of a double dip in the business cycle, minus 20%. From April, May, then, we've had a gradual recovery. But still year-over-year, minus 11% for the third quarter. So how have we dealt with this? How have we mitigated this downturn, this impact on the top line, which is actually the same magnitude as during the financial crisis in 2009? Let's go back to the 3 cost mitigation programs that Stefan mentioned in his presentation here and talk a little bit more about the details one by one here. Starting with the program we kicked off in 2019, SEK 1.7 billion, 3,000 employees. We had SEK 400 million in the income statement in '19. We had SEK 1.2 billion -- we will have SEK 1.2 billion in 2020. We've had SEK 1 billion so far, and there will be a little residual year-over-year for the first quarter in 2021. The next mitigation program was launched, as we were hit by COVID-19. We communicated SEK 1.5 billion in work time reductions, short-term weeks, temporary savings. And that is still valid. It still holds. We have done SEK 1.1 billion so far. But on top of that, we have reduced discretionary spend of the same amount, SEK 1.1 billion. And this is very much travel. Everybody is working from home, who can work from home. We don't see customers. We don't have exhibitions. We don't go to trade fairs, et cetera. We don't have conferences and so on. So the spend level has gone down quite dramatically. Of course, going into 2021, both these activities, work time reduction and reduced discretionary spend, will be reduced of course, then fade off as volumes come back. Some will continue for a while into 2021, but some of these activities will have to be at least partially replaced by permanent savings. And that you see in the third program, which will start to kick in, in 2021, SEK 1.3 billion in savings, the majority hitting the income statement in 2021 and a little bit in 2022. And there might be more to come as well, depending on how the business cycle develops. In the lower left-hand corner, you see the number of employees in the Group. You see, in 2019, the big effect from the first cost mitigation program. You see, in 2020, the big effect from the short-term working weeks, also a little bit effect of the 2019 program and some organic reductions as well. If we look at the permanent reductions here now. The '19 program and what will come in the 2021 program here, it's around 5,000 employees. That's more than 10% of all the employees in the company. And this has helped us, both in cost of goods sold and in SG&A in the Group. So let's jump into the income statement and talk a bit about the details here. Starting with gross contribution, which is the part of cost of goods sold, which is direct costs. Of course, pricing is important here as well and pricing has been positive in Sandvik all through this top line decline. It's been around 1.5% to 2%. A big part of the direct costs are variable, of course, like material and processing costs and so on, so that helps, of course. Footprint consolidation has helped as well. So we've been fairly resilient here in the gross contribution. If we then move to the gross margin, then you add the fixed cost as well in cost of goods sold, which is all the production units, the factories and what have you -- and it is a little bit of longer lead time to deal with those costs. We will deal with it. But these are larger projects. It's not something that you can do overnight, like from March to April. These are longer projects, but we will deal with that as well. But we're fairly happy still with how this looks. Further down in the income statement, SG&A. The ratio, if we go back a little bit in time here, the ratio -- SG&A ratio at the previous peak was 23%. And then it jumped up to 26% in the trough 2016. We were not happy with that. And we promised that we should reduce it to 23%, which we did in 2018. But as the business cycle cooled off in 2019, and then as COVID hit us, we were a little bit afraid that this would jump up. So we've had a lot of focus on this one, and we're happy to see now that we're actually down on 22% now. And individual months, we've been as low as 20%. Now having said that, of course, short-term savings, temporary savings does help, of course, short-term working weeks, lower discretionary spend, et cetera. And some of this will come back when we have to start to travel again, when we would start to meet customers again, which we will do. But our ambition is to keep this on a healthy level by replacing part of the temporary savings with the permanent savings for 2021 and onwards. So this, of course, then adds up to the EBIT margin, has been mentioned by Stefan today as well in the introduction here. The 16% trough margin is a margin for a tough or normal, let's say, heavy business cycle downturn. This has been worse. But still, we've been able to keep it up. It's on 16.8% now. So we have delivered on the trough margin target. The reported 12-month number is 16.7%. So a sharp drop in demand. One step ahead with the savings programs, decentralized organization drives agility. So it is working. Now let's go a little bit further down then in the income statement, interest net and taxes. On the left-hand side, you see the interest net. And the interest net is now approaching a level of SEK 400 million rolling 12 months. We are coming from SEK 1.5 billion, 5 years ago. The debt has, of course, been reduced quite heavily. We'll have a look at the balance sheet in a second. But we have also gone through a major recapitalization project with our subsidiaries replaced, very expensive local borrowing with equity injections. So this has improved the interest net with SEK 1.1 billion on an annual basis. That is like SEK 0.70 per share after taxes. So it has a profound impact, a significant impact on the earnings per share. On the right-hand side, you see the tax rate. It's coming down as well. We have a guidance of 23% to 25%. It continues to come down, and there's no magic to this, really. This is just good tax control, efficient processes. And also the fact that in many of the markets where we are big, like in India, Czechia, Finland, Sweden, United States, the income tax rate for corporates have come down to around 20%. So of course, the tax rate comes down. If we then leave the income statement and then go to the balance sheet and the cash flow, you have the quarterly cash flow on the left-hand side. And it's interesting to see here the rolling 12-month numbers. You have the cash flow is in the blue line, you have the rolling 12-month earnings in the red line. And the way this works is that, when business is up, you have to produce a little bit more than you actually sell. So then earnings is ahead of the cash flow. When business is down, you actually produce less than what you sell. So then you get a release from working capital. And you can see how we had a release from working capital, both in 2016 and in previous trough and also now in 2020 when the top line is down. So it's behaving according to expectations. On the right-hand side, you can see working capital, well under control. And we're especially happy with the inventories. The inventories are well managed. We have not seen, let's say, any major buildups like we did in 2018 and 2019. So very well managed. We're also happy with the receivables. We don't have any increases in overdues, and we don't have any increases in credit losses. Then that then takes us to the debt. And the 5 years development of the debt, you can see how the gearing now has come down to 0.05. The financial target is 0.5, very strong and solid balance sheet position. On the right-hand side, we have added one of the rating KPIs, net debt over EBITDA, Standard & Poor's definitions. There are no official targets as such for that. There's no financial targets for it, but 1.5 net debt over EBITDA is kind of a threshold. If we would go beyond that line, then the rating institutes will start to ask questions for us within the current -- given the current rating we have, which is A- with a stable outlook. So it looks good, really good. So what will we do with the balance sheet? There's a lot of power -- firepower in the balance sheet for acquisitions and investments. And if we talk just briefly about capital allocation, on the left-hand side, you have the, let's say, the schematic or abbreviated capital allocation that we have used for these 5 years. We said basically, we'll use 1/3 for debt reduction, 1/3 with dividends and 1/3 for M&A. Now, we don't really have any debt left. So it will move over to more leverage, our growth opportunities. And if we talk about growth opportunities and cash flow and balance sheet, we do have an annual cash flow after dividend, which will give us like SEK 5 billion annually to use for acquisitions. And this could, depending on what you buy, of course, be equivalent to like 2% acquired growth, maybe 2%, 2.5%. But also, put that aside, if you just look at the balance sheet, the way it is right now, what -- how much can we leverage the balance sheet? Let's say that we would go to 0.5, which is our gearing target. That would give us more than SEK 30 billion in firepower because the equity is SEK 66 billion. So quite some firepower. And we must also remind you that the gearing target that we have does not include transformational M&A, if any of that would arise. Final slide, just a bit on the balance sheet after a possible -- or not the possible, after an SMT spin. This is just a simulation because we got a lot of question around what will it look like, what will SMT look like, what will Sandvik look like after an SMT spin. So we've just taken the balance sheet as per September 30, and just simulated the spin. What would happen? Group is the Group today, SEK 23 billion in cash, SEK 3 billion in net debt, SEK 66 billion in equity and a gearing of 0.05. So after the spin, we would give SEK 1 billion in cash to SMT. The net debt would be 0.5 because you have pension liabilities, capitalized leases, which is a little bit more than SEK 1 billion. Equity, SEK 11.6 billion. And gearing then, 0.05. So a very strong balance sheet for SMT, as it sort of sails off as an independent company and a strong balance sheet for Sandvik as well going forward. So referring back to the previous slide here, where we talked about firepower in the balance sheet. Of course, if the gearing -- the equity goes from SEK 66 billion to SEK 54 billion, the firepower goes down with SEK 5 billion. So -- but that leaves still -- leaves SEK 25 billion firepower or headroom in the balance sheet for M&A on top of the annual cash flow of SEK 5 billion. So with that, I'll hand over to you again, Emelie.

Thank you, Tomas, and thank you, Stefan. So we are now ready to start the first Q&A session. [Operator Instructions] Thank you. I will actually start with one question from the webcast. So this one is from Daniela Costa at Goldman Sachs. So given the good work on margins this year, why not be more ambitious on the trough cycle margin target, maybe introduce a peak trough range instead?

Yes. No, it's a fair question. First of all, I think we should say that we're not fully through this crisis yet, even though we are confident that we will continue to deliver on this target. I think it would maybe be a little bit too bullish to, at this point, increase the trough margin target. It is also the case, as we said, that when we have the SMT spin, when we get closer to that, we're going to review these targets as well. So rather than shifting them around every year, we prefer now to focus on delivering -- continue to delivering on the trough margin target and then we'll come back with an updated target when we look at the Group, excluding SMT, not too far away.

Thank you. So operator, if we have any questions from the conference call, please go ahead and start.

[Operator Instructions] Our first question comes from Magnus Kruber from UBS.

Stefan, Tomas, Magnus from UBS. Just a couple from me. So first, what cumulative impact on SMS top line do you expect from electric vehicles until 2025? Do you have a sort of nominal number for us there, as an annual headwind? Or how do you look at that?

Yes. We will actually, in a few minutes, we will come into more details around that. But until 2025, we expect automotive to grow for SMS by about 1% CAGR. We will come back to more details shortly.

Got it. And on the top line synergies, do you expect to gain between Machine Solutions from the growth in Manufacturing Solutions. Do you have any comments on that?

I don't -- we don't have any specific numbers for that. Of course, we have it as part of our various acquisition cases, for example, there are synergies related to that, but it's not specific numbers that we are breaking out and mentioning here. But there are those synergies, definitely. It's a big part for motivating these type of deals.

Yes. But it would be up and above the 5x growth on adjacent and digital that you have commented?

There are synergies. If you take the CGTech acquisition, for example, there are synergies that will be in the pure cutting tools part of the business, meaning driving additional cutting tools. And those are not counted in the adjacencies of the 5x. Those are part of the growth ambitions for the core SMS business.

Our next question comes from Gael de-Bray from Deutsche Bank.

My question relates to the Group's growth ambitions. So at the group level, the financial growth target is unchanged at more than 5%. As far as I can understand, there's going to be about half of that growth coming from acquisitions. And then you expect each division to grow at least twice as fast as their respective estimated market growth. So how do I reconcile all of that? I mean, did you really expect the market growth of your businesses to be only 1 -- between 1% and 2%, which will be well below global GDP. If you could just talk about it.

No. Yes, sure. No, you cannot add it in that way. As each of the businesses will soon go into more detail on -- each of them have the ambition and the target to grow at least twice -- at twice the pace of their underlying market, including acquisitions. Some of them will have the target to grow faster than the market organically, but you need to add the acquisitions into the mix to get to the 2x or faster growth targets.

Okay. And generally speaking...

& Have I answered...

Yes, absolutely. But generally speaking, how do you see the market outlook of your respective end markets? Would it be better than GDP growth or slightly below?

That is what we -- what I just showed you in one of the slides. So for Mining and Rock Solutions, 3%; for Rock Processing, 2.5% to 3%; for Machining Solutions, 2%; and for Manufacturing Solutions, more than 10%. So I guess, I don't know what assumptions you would have on GDP growth, but I guess it's roughly in line with GDP growth, with the exception of Manufacturing Solutions that will grow faster than that. And then we double that up in terms of our own targets. But then of that, about 2.5% CAGR will come from acquisitions.

Okay. Can I have a second question on SMS?

Yes.

Thanks. Look, I think there's clearly a greater focus now on growth. So I guess you're ready to make a bit more acquisitions in SMS, perhaps in the design or in the analysis part of the business. I mean, historically, design, machining and analysis, all of that have been pretty clearly separate and defined phases in metal cutting. So the question I have is, as you prepare to embark on a more aggressive M&A strategy there, I mean, do you have any concrete examples where customers have actually been asking you for an integration of these 3 stages of design, machining and analysis to sort of create a more seamless manufacturing process?

Yes. And we will actually present some slides on a few of these value propositions when we present manufacturing solutions. So I'll pass now and we'll come back to that later today.

Our next question comes from Klas Bergelind from Citi.

Yes, Stefan and Thomas [indiscernible]. The first one is on the sub-SEK 1 billion of sales in 2019 from high-growth areas in SMS. Can we get some color on what Metrologic represents out of that 2019 number versus the SEK 400 million to SEK 500 million of sales when you acquired it. I appreciate that Metrologic has been operating a bit stand-alone until now, but still interesting to get some color there. I will start here.

Yes. I'm not breaking out individual businesses in this. We can just say that they were growing until COVID. They have an exposure into Automotive, especially in Europe. So they have been hit by that. But they were growing up until then. Now we expect them to -- from here on, we expect them to come back to growth again. But that's where they are. We should also realize, just a final comment, that the Metrologic acquisition was actually 2 companies, Metrologic and a company called AT&T, which is in the U.S. So it's 2 different companies that we are running there now.

Yes. Okay. No. Then my second one is on your growth ambition and sticking to SMS, but focusing a bit on round tools. I think you have said Stefan, when I spoke to you in September that your ambition if to grow markets and round tools over time, similar to those in SMS. And I think round to market share today is around 10% versus inserts at 30%, roughly. Is that still the ambition because that, obviously, comes on top of that 5x ambition you have in the high-growth areas?

Yes. The 5x has nothing to do with the core cutting tool business. And this will shortly be more clear. We will explain this in more detail shortly. But this is, obviously, in the core Machining Solutions business. And yes, the ambition is to grow that. Nadine will explain in more detail how and where. So we'll come back to that and we can -- you can repeat the question at the end if you don't get the answer during the presentation.

Sure. Just 1 final one, probably to be quick, on the conventional on the conventional business again. And I know this is sensitive to macro of course, and we're faced with further shutdowns. But if you could share with us, Stefan, any sensitivities that you have done outside of Automotive. You said 1% growth in autos until 2025. What is the base case for Aerospace? What is the base case for oil and gas? General engineering? Just so we get a sense for the conventional business in terms of how you look at a potential scenario?

I will shortly come back to that as well. Because, yes, we're going to talk a little bit about the market development shortly. I'll come back.

Our next question comes from Maddy Singh from Bank of America.

Just clarifying on the growth target, the 5% target for the group, whether that includes the M&A ambitions as well, up [ 2.5% ] CAGR contribution from that? The first question.

Yes. I mean if you do the math, you will -- and you look at the underlying market growth that I explained, the breakdown of, and you will then add to that, that you will see later today that we have the ambition to also organically grow faster than the market in some specific areas. You do the math on what that means. And then you add our ambition of 2.5% organic growth through the cycle. You will probably arrive at a number that is slightly higher than 5%, but that is -- we have a target of growing at least 5%. So that's where we are.

Can you please remind if -- what was the growth targets previously? Was the 5% growth target previously? Did that include M&A as well in that?

You mean prior to last year?

Yes.

Tomas.

Well, we -- in the period 2016, up until 2019, we did not have a growth target. In 2015 and '16, the company was clearly underperforming, we were at the trough. So the focus we had at that point in time was to restore profitability and returns in the company on the flat market. So we didn't have a financial target, which was based on growth at all. Then the market did come back. And of course, we did better because of that as well. And before that, we had a much higher growth target, which we basically never reached.

Great. The second question is on SMRT. So with the creation of the 2 new divisions within that. I'm just wondering when you compare the valuations of Epiroc trading closer to 20x EBITDA. And whether that has been, let's say, one of the factors being considered into giving out more details around this MRS division to give more like-for-like comparison to the market Is that the first step you have taken to kind of bring market attention towards the valuation gap here? And if that doesn't work, would you be open to take further actions? And what kind of actions would you have in mind?

So I mean, we would not reorganize the company to be able to show numbers to try to increase the valuation. We -- but what we can say is that if we wouldn't have done this reorganization, which are done for the reasons of accelerating focus and growth in these areas, we would most likely have broken out some numbers to show you some of these things as well. Less details probably, but to give you more of a sense for how these 2 different businesses have been performing. Because, quite frankly, we do that ourselves internally, and I think it's a relevant metric to show. So no, we did not do this change because of that reason, but I think it's a good consequence that we can now show some of these numbers as well.

Would you be open to take further actions around that if the valuation gap doesn't close in, let's say, next 1 year?

I don't show what you mean by further actions.

Thank you, Maddie. I think -- thank you, Maddie. I think we need to move on to next question, but please line up again, if you have further questions.

[Operator Instructions] Our next question comes from Ben Uglow from Morgan Stanley.

Stefan and Tomas. I guess, two, the first was really just about the approach to M&A and the kind of internal processes. I mean, since you've been at Sandvik, Stefan, what are you doing differently in terms of the way that Sandvik thinks about M&A? And I'm just curious, in terms of the sort of decentralized division, divisional structure, 23 businesses. How do you go around or how do you go about identifying your list of targets? So how do we get the right list? Is it sort of coming from bottom-up? Is it coming from top down? So just a sense on that? That was the first question. Second question, I guess this may be a little bit more for Tomas. You kindly gave us the figure around sort of SEK 5 billion organic cash flow in terms of firepower and acquired sales presumably something like SEK 2 million, SEK 2.5 billion. Some of the targets out there, particularly in software are going to be at multiples that are well beyond those kind of organic levels. Can I just ask how are you thinking about software multiples at the moment? How are you -- in terms of what you're seeing in the market right now, how does Sandvik get its head around paying those elevated multiples?

So yes, I'll start. I mean, regarding acquisitions then and the approach to that. I think the first thing, and this is what's my last bullet point on one of the slides is to make it a normal, a standard part of driving your business, a concrete thing. Have acquired growth as part of your growth targets. Don't just have organic growth and then maybe we'll do some acquisitions. The acquired growth could be part of your overall growth target on a 3-, 5-year perspective. So you actively need to drive acquisitions, and each division takes ownership for driving acquisitions. Driving acquisitions by pushing it constantly from the top that does not give the scale and the agility that we need to make this happen. My experience is you unleash the power and you can create a company with an embedded acquired growth strategy where you have each of the entities. In this case, our divisions all focusing on acquisitions. That also answers your -- 1 of your other questions there. That is where we need to identify these targets. It shouldn't be me or Tomas sitting with a bank to get the list of acquisition targets, that's too late. The division should come with that to us with so many targets that we can only select half of them. That's when we will execute on this, reach our targets and get good quality acquisitions in. The other thing that we are in the process of doing is removing red tape. We are still not a company that are used to doing acquisitions. So we get bogged down in details or get too risk avert. So it's going to be a journey. I get frustrated still too often, but there's too much red tape in the organization and too much risk aversion, quite frankly. So that is also something we're working on. I don't think this is strange at all. This is something -- like everything else, you need to do it a lot, you need to practice to get good at it.

And on the software question.

Yes, sure. I can talk a little bit about that. And yes, of course, we know that software companies, digital, et cetera, et cetera, comes with different multiples. It's not like bolt-on acquisitions. Bolt-ons where you maybe pay 1x to 1.5x sales and you pay maybe 7x to 10x EBITDA. When you go into -- and you have a return on the investment after normally like 5 years or something. Software acquisitions, of course, comes with multiples of 15x EBITDA, 20x, 25x, I mean, in that neighborhood. So that means that, that from a pure return point of view, it will sort of double the time at least. It's like 10 years. We know that. But of course, we have a strong balance sheet. We have a strong operational annual cash flow, but housekeeping come in here as well. I mean, there is -- even though the firepower is good and strong, there's a limit to what we can do. So we just have to be wise and pick or choose, what we do. But this is what software businesses comes with.

Our next question comes from Andreas Koski from Nordea.

Several questions on growth today, but I would like to ask one as well. So you expect market growth of 2% to 3% for your businesses, and you aim to grow by at least twice that pace, including acquisitions, which gets me to around 5%. And that implies to me that your growth target is not really dependent on SMT being or not being part of the Sandvik group. Is that correct? And what kind of market growth do you expect for SMT?

I'll leave this second half of that question to Johan when it comes to the stage because of the process we are in, I think he should talk to that. No, it's true. We have not included SMT going forward in our long-term growth target, so to say.

So that wouldn't change if SMT was spun out today. [ I mean... ]

Let us come back to that when we do the revision of the targets when we when we are closer to the spin. I mean, SMT today is, well, let's say, 15% of the business. So it has to be a pretty big deviation for that to move the needle sort of a percentage point for the group. So I think the assumption if we round things to hold percentages, it's most likely that it will not change, but let us come back on that.

I need to close the Q&A session now. But Andreas, we will have another Q&A session at the end of the day, which is longer. So let's move on to today. Thank you. Stefan will now do an introduction to our business area, Sandvik Manufacturing and Machining Solutions. So Stefan, the floor is yours.

Thank you, Emelie. I was just waiting for the slides to pop up. There we go. So yes, I will do this introduction of Sandvik Manufacturing and Machining Solutions. And then we will have the respective presidents come up and present each of the 2 segments in more detail. If we look at the numbers for SMF in brief, you will recognize these numbers because they are the same as they have been for SMF in the past, obviously. So you know the story. We were in the growth cycle for about 3 years from mid-'16 to mid-'19, then we came into a down cycle from an industrial point of view. And then on top of that then, we have the COVID situation. Despite this good margin resilience, especially in relation to historic performance, from this business, so well done there by the team. You also know the split in segments, Automotive, around 26%; Energy, 10%; Aerospace, 14%; and General Engineering 47%. And then you also know that we usually say that some of general engineering is actually going into Tier 2 or Tier 3 suppliers, especially in Automotive and Aerospace. So Automotive is more likely around 30% overall, and Aerospace at 3%, maybe 4% to that number as well. And then from a geographical point of view, about half the business in Europe and the other have split roughly equally between North America and Asia. If we look at the overall demand drivers in this part of the business, there are both headwinds and tailwinds. If we look at the positive side, we continue to see a trend towards more complex shapes and also more advanced machining using more and more multi access CNC machines, for example. And both of these are driving the need for more advanced tools. We also have additive manufacturing, which we consider to be a tailwind. From a machining perspective, additive manufacturing is basically a near net shape technology. When you have done the printing, you still need to post process and do machining on the parts. And because of the complex shapes and typically advanced material used in additive, also, that is driving development for more advanced tooling, which is offsetting then some of the substitution that additive otherwise would give. Then on top of that, we have our own additive division that is addressing a wider part of the value chain than we do in pure machining. So if you add that on top, we really see additive as a growth opportunity for this business as a whole. If we look at the market development then, we also see this trend toward more process automation, which is driving a need for more complete solution sets as well as the utilization of more digital tools and solutions. This, we also consider to be an opportunity for us if we play our cards right. Aerospace, obviously, a headwind for the next couple of years. Although, of course, from the level we are now, it will be growth going forward. If we take a 2019 base, it's going to be a tough couple of years. Our current projection is that they will be back at 2019 level around 2024. Then you could always debate plus or minus a year, I don't think anyone really knows. But we and basically, all of the experts or the other players in the industry that are trying to forecast long-term demand believes that ultimately, Aerospace will come back on its long-term demand trend. So we believe that Aerospace mid- to long term will come back and become, again, a growth engine for us. So here, we have to separate the time perspectives in an important way. Then we have Automotive, which is more of a challenge long term, and we have given a separate slide on that here. Here, obviously, there are different scenarios. This is a mix of the most likely scenarios that we see and our own analysis and what we believe will happen. So here, you have the vehicle production of light vehicles. So this does not include trucks and things like that, which I think would make this picture even looking a little bit better, only the light vehicles. And then you have on the line graph there, the development of the cutting tool, the cutting tool potential that this is driving. And you obviously are seeing a gradual growth of the overall market because of economic development and GDP in the world. But we are seeing a shift towards battery electric vehicles and a decline then in combustion engine vehicles. Overall, if we look at this mix between '19 and '25, the cutting tool potential will grow by about 1% CAGR in this period. So we start to see an acceleration towards BEVs also offset by an acceleration of the need for hybrids. If we then take the second half of this decade, what BEVs continue to accelerate, while hybrids will maybe keep their share but not grow further. So BEVs will then grow at the expense of combustion engines even more. We expect flattish growth in automotive cutting tool potential throughout the latter part of this decade then. If we would take this to the ultimate scenario, let's say 2040, obviously, a lot of speculation comes into play here and policy decisions and so on. But in an end-game scenario where there is basically very few combustion engine cars left. There will still be a portion of hybrids and the large majority is battery electric vehicles. We would then, in the 2030s, in that decade, see about minus 1% CAGR to reach that sort of end game. So again, a lot of speculation in that, but that's the scenario we are working with. So clearly, a long-term headwind maybe not as material as some would believe. But still a headwind that we are working with and of course, also working to offset. This is one of the reasons while we are focusing now on a broader part of the value chain around machining. We will, as you will see, grow machining in itself as well, but we are also working with a wider part of the solution set here. So we are now taking what used to be SMS and these 7 divisions, splitting them into 2 segments: one, focusing on Machining Solutions, essentially with 3 divisions, 3 brands focusing on Premium, 1 brand, 1 division currently focusing on the Mid-market. They are addressing a market of, in total, SEK 180 billion, 2/3 in Premium, 1/3 in the Mid-market, and we expect this market to grow up about 2% during this period CAGR, including then the lower growth in Automotive. Then we have the other segment, Manufacturing Solutions. This, we will now have 3 divisions in Design & Planning Automation, Additive Manufacturing and Metrology. They have an addressable market of SEK 120 billion. But in the businesses we have today can only serve about SEK 50 billion of that market. So if we want to address the gap there, we typically have to make more -- or specific acquisitions to fill that gap. And in that gap, you will find, for example, a broader definition of the industrial metrology space that we are not addressing today, and this is what I mentioned in the beginning. Whether we will address it or not remains to be seen. We believe the SEK 50 billion that we can service is a substantial market to go after to begin with, especially since it's growing by more than 10% annually already today. So with that, I think we should go into these businesses in more detail. So I will hand over to the President of SMS, Nadine Crauwels to take us through SMF.

Welcome. Thank you, Stefan. And also welcome from my end. My name is Nadine Crauwels, and I'm President of Sandvik Machining Solutions since the first of October. Before that, I have been President for Sandvik Coromant, one of the core divisions for the last 3.5 years. I'm going to guide you through the plans ahead for this business area segment. Sandvik Machining Solutions is built on 5 divisions in a decentralized manner very close to our customers, and we are covering both Premium and Mid-market. The fifth division, Wolfram, is the one who is delivering the powder, internal and external for the cemented carbide. These 5 divisions are having an extremely strong brand and also a very high brand awareness, which is really truly market-leading and industry-leading, around 93%. Our ambition with this Sandvik Machining Solutions business area segment is the focus even stronger on growth. But that's not the only thing. We also want to evolve from being a tooling and a tooling system supplier to become a true machining solution provider. So what does it mean then from a market development point of view for us moving ahead? We have some challenges as we heard from Stefan before, but at the same time, we also have some great opportunities. We can see that the challenges that has been mentioned before are very much related to the slow recovery in Aerospace and Automotive. On the other hand, we also see a light headwind from the electrification in Automotive, even though we need to say that until the end of this decade 2030, it's not going to have an impact on our tooling potential. The last challenge we see is the increased data transparency. The digitalization has been driving much more availability of data and a much bigger transparency. That also means that we can also create opportunities through it, but at the same time, new competitors come to the scene, beyond the traditional ones that we have had on our radar before. Moving into the great opportunities we have. We would like to start highlighting the lightweight materials. This is mainly driven from the focus on sustainability. Then we also have more complex components, more products that are near net shape. So those who need finishing touch in machining. Here for, we also need to provide and can provide a growth in our round tools business. At the same time, we also see a grower and higher growth rates in Asia as well as in the Mid-market. And last but not least, we see increased demand for truly integrated manufacturing solutions. Our customers are not any more satisfied with suboptimized efficiency in 1 or different steps of the value chain. They want to see an end-to-end optimal solution. And at the same time, they also want to see a solution to close the knowledge gap. So what is our strategic direction ahead with this market development that is going to be around 2% CAGR in the next coming years. Our direction ahead is built on 3 cornerstones. The first Growth Above and Beyond, driven by an agile business, resulting in a leading position today and even broader one tomorrow. Growth Above and Beyond really means that we are going to grow above the market. We are going to gain market share in certain specific pockets and also regions. On top of that, we are going to expand our offer. We are going to grow beyond the hardware also in software businesses. All that together will lead us through this machining solutions setup. We are going to drive an agile business, and this is truly lean and flexible operations throughout the full business cycle. We have learned from history in the last downturn that we were way too reactive. Since then, we have been gearing up and working on a culture of continuous improvement. We have consolidated our footprint, and we have been using the data analytics as well as business intelligence to be more proactive. Our current resilience has been shown during this downturn, but we also want to secure that we have the right, strong financial performance also in the recovery and the upturn. This all is going to result in a leading position today and even strengthen and broaden for the future. That means that we are going to focus on customer value through the full value chain. At the same time, we are going to lead a sustainable industry. If we think about this leading position, how is that going to be broader in the future? It's a leading position in sustainability, in attracting the right people within innovation and technology, but also in being the central point of contact when we talk about digital machining, truly resulting in an end-to-end solution for our customers. In the next slides, I would like to dive a little bit more into this growth aspect, Growth Above and Beyond, how are we going to realize that? We are going to focus on 4 areas. First one is related to our assortment, application & technology leadership. The second one is built on market expansion. Then digitalization is going to be giving the opportunity to expand our offer, but also our reach in our customer base. And last but not least, we are going to accelerate our acquisition and partnership approach. So starting with the first one, assortment. Application & technology leadership is really showing our strong history. We are market leader in our industry. That means we are introducing more or less 8 new products every day and having around 740 active patents. This position, we want to strengthen. We want to even take a market share in certain specific areas. As, for instance, in the lightweight materials. Through the push of sustainability, these will grow faster than average and also will demand stronger tool performances. The materials we think about in this case are aluminum, composites and titanium. All 3 of them are used in Aerospace, Automotive, Medical, but also other segments. In this case, these materials are all going to grow above, but the highest growth is within the composites. Here, we can see a high number of the single-digit percentage every year moving ahead. A second area in the assortment that we are going to focus on is the round tools. We want to take a leading position in round tools, through partly organic growth, but also added on with the right acquisitions. This is a journey that we want to do because the round tool business is growing faster than average. And it also has still an extremely fragmented situation in the market. So 2 good reasons why to push it even further. This journey is not a new journey. We started that already around 18 months ago. We have been adding different acquisitions on our portfolio like OSK, or Wetmore, or Mellon Dura-Mill, that are a few of the companies we acquired in the past period. This is also something that we will continue doing both in Premium and Mid-market. Then last but not least, we are going to strengthen our leadership in inserts. Inserts is truly our home turf. Insert is the place where our market share is the biggest. That is also then where we are going to focus our investments in R&D. The best examples we can give is, for instance, the steel turning grades that are the highest volumes in the industry have been created a new insert for Sandvik Coromant introduced only 4 weeks ago. These inserts have a performance that is outperforming most of the competitors available on the market today. It's not only Sandvik Coromant introducing new steel turning grades, but also Seco brought on a new milling cutter, creating productivity for our customers, but also cutting power consumption in half. On top of that, Walter is also introducing a parting off tool that is having a smaller width insert, and that is adding on to the current assortment. So this is what we are going to do on an assortment-wise, moving to market expansion. Here, we can identify 2 different areas. We want to grow in a certain geography, and then we talk about Asia. The growth in Asia versus the western part of the world is double. On top of it, our market share today in Asia is lower than the rest of the world. So that gives us a double opportunity to really gain momentum. And that will be valid for both Premium and Mid-market. This will not happen only with organic growth, but also, again, through acquisitions. The second part of the market expansion is going to be on the Mid-market. Here, we have the ambition to be on the podium of the Mid-market suppliers. That means in concrete terms that we will double our market share by 2025. And on top of that, we also know that the Mid-market is going to grow 50% higher than average. Also in this area, we have been taking really good steps in the last years. So Dormer Pramet, our Mid-market division has been growing and not only growing from a top line perspective, but also securing a really strong financial performance as industry standard. We also are adding acquisitions in this area. We signed an agreement to acquire, for instance, Miranda tools. And that is kind of answering on both of the market expansion because it is Mid-market, but at the same time, also supporting because it is in India, our geography growth. The third area I want to talk about is digitalization. In digitalization, we are going to expand our offer, but also our reach. We are all affected by digitalization in our private life. And also, our customers are seeking new ways of interacting with us. They want to search, find and use tools and tooling systems in a remote way. That gives us the advantage to reach more customers than we have done before when we needed to meet them face-to-face. On the other hand, digitalization is driving also our customer needs to have efficiency through their whole shop floor. You see here on the slide a picture of the shop floor of any customer, independent size, with main 4 areas. In the bottom, we see the design. Then on the left top, we see the preparation. The biggest area on the top, you see machining, the blue highlighted one, and then on the right, you see the verification. Those 4 elements, every single customer has to go through. Today, they are not interested in optimizing 1 area, but they would like to see the end-to-end efficiency from all of them. Machining, the blue one, that is our home turf. That is where we have been successfully delivering and be a market leader in tooling and tooling systems. But we need to understand that the key ingredient in the machining area is the knowledge. Knowledge is going to be able to be digitalized. And through that, we can add services and softwares that create added value towards our customers. A few examples are, for instance, sensor embedded tools. Those are the ears and eyes for our workforce in the shop floor when you can't see anything deep on the inside of a workpiece. Machine monitoring is another example and process control. One of the big issues we saw for customers in this case as well is tool breakage. Through process monitoring, we can detect and avoid a tool to break, what is cost avoidance, but at the same time, also a lot of time saving. We don't have the ambition to stop in the machining area. We are going to expand into also the design and the preparation. The reason for that is that a lot of the decisions are taken earlier. The earlier decisions, they can take the more reduced waste you can have in time and lost machine utilization. So the decisions we can take in the design and the preparation are related to selection of tool enhancement, machining strategy optimization, and then last but not least, a virtual way of simulating verification and also optimization of the process planning. This last area is an area that we have not been developing ourselves. This is an area where we signed an agreement to acquire the company, CG Tech, and I will come back to that soon. This total digitalization and expanding offer is going to deliver an additional SEK 1 billion by 2025. But we need to remember that, that is not the only advantage because through these, we can, of course, increase our cross-selling activity towards our toolings and tooling systems. Moving a bit into CGTech. CGTech is a U.S.-based company with a full global footprint, 12 countries, and also active in all segments. It has a revenue around USD 49 million. The main important thing to remember here is that CGTech is within this field of simulation, verification and optimization for the market leader. They also have a very strong relationship already with Sandvik Coromant. They have been working together more than 15 years, and their main product, VERICUT is used in the production units at Sandvik Coromant. One other thing that is extremely important in the collaboration with the tool supply is the fact that CGTech is truly cam and machine toolmaker independent, what also enlarges our ability to reach the market. The growth journey ahead, together with CGTech is planned to stand under the different legs. One, of course, is the stand-alone growth. As manufacturing is advancing, more demand on simulation and verification is needed. On the other hand, our optimization model has not reached full penetration yet, and they are market-leading. That means there is more price power into the ability to push the pricing analyst above. Then there is synergies. Both Sandvik Coromant and CGTech has around 65% of common customers. Meaning there is a lot of leads that can be generated from both ends in 2 directions. And then the third aspect that we should think about is about knowledge synergies. Feedback loops. If we talk about end-to-end, we start with some feedback loops. Here, we can learn and see the effect on the machining and feedback that information into CGTech, so they can optimize their way forward. CGTech, on their end, with their experience, can give feedback to the tool supplier to even enhance their tooling guide and parameter recommendations. So a true win-win situation and steps to the end-to-end connection. The last area in the growth journey is related to acquisitions and partnerships. When you look to the 3 previous mentioned, assortment, market expansion but also digitalization, it's clear that we cannot do that organic. So we need acquisitions for the round tools, the Mid-market, leading position and our services and digital solutions. At the same time, we also want to use more partnerships. We want to work with true ecosystems. As we said, we want to be the central point for the digital machining. We also have great opportunities to collaborate with machine tool builders with cam suppliers, but definitely also with our own Sandvik Manufacturing Solutions to codevelop and also resell products in our arena. In total, to be able to do the growth we want, 50% of our growth is coming from acquisitions. Then I would like to make 1 point. We are part of the industry we serve. That means we have the best opportunity to show our customers what it means to become a digital company, what it means to be Industry 4.0. I would like to highlight the Sandvik Coromant production unit in Gimo in Sweden. They received in January 2019 from the World Economic Forum, 1 out of the 16 nominated lighthouses. That means that they have a full digital threat, automated process from design until the full production, not only a digital threat, but also a green factory. They have a full assessment that is done yearly to have the sustainability scope from people, planet and profit. But rather me explaining it, let's take a look at the movie. [Presentation] So summarizing, we can say that we are set up for growth. We are going to add SEK 1 billion in digital business. We are going to grow with a pace double versus the market growth, and half of it is going to come from acquisitions. So summarizing Growth Above and Beyond, driving an agile business resulting in a leading position today and even in a broader way tomorrow. Thank you.

Thank you, Nadine. It's time for a short break. So see you again at 2:45 p.m. CET. [Break]

Hello, and welcome back. We now have Sandvik Manufacturing Solutions President, Lars Bergström. Lars, please go ahead.

Thank you, Emelie. And also from me, a warm welcome. I'm Lars Bergström, right now in the process of setting up this new segment of Sandvik called Sandvik Manufacturing Solutions. Stefan described it as the segment where we have a total addressable market of SEK 120 billion, SEK 50 billion in serviceable market with the present offer that we have and a growth rate of more than 10% per year. And this is an area where we will develop as we go. If I start to look at how this is being set up, we have basically 3 divisions. We have the Design & Planning division where we are focusing on transferring the physical world to the virtual digital world through the manufacturing process, basically, from the ready design of the product through the process until the parties being then machined. We have Additive Manufacturing. This green technology that helps our customers and our end users to save both natural resources and energy by creating more optimized products than you can do with more traditional technology. We also have the Metrologic area or the Metrology area, which basically then today is consisting of 2 divisions: Metrologic, the software company out of France. And then as also Stefan said, the ATT company, which is a software service company out of the U.S. Now what we are then addressing with this, and with quite a lot of questions coming from you during the Q&A session. I will try to shed some light on how we look at this versus the Sandvik Machining Solution segment. Nadine showed before this total workshop picture that actually shows how a traditional workshop looks like. And in this workshop, after the customers has designed a product, they are taking it into the cam area or the production preparation area. And this is really where customers are transferring the product data from the CAD files over to something that the machine tool can understand and perform its task. In that process, when they are defined at the cam, they are also, at the same time, defining what tools are we going to use for this. From that, then they are then transferring that data down into the machines. And what we then can do in this initial stage here is to be part of this transfer of the data down to the machines, but also to take part of the quite substantial information flow that needs to go around the tooling in itself. Additive Manufacturing, where we have a fairly long experience through our acquisitions of BEAMIT, which is 1 of the largest service companies and also our own powder manufacturing company called Osprey. We can combine that into also substantial know-how base for customers in terms of how to run additive manufacturing. These machines will gradually be more commonplace in the machine shop, even though today, they are fairly much located in separate parts of the [ Nordic ] customers or also that customers are then producing their parts at service bureaus like BEAMIT. If we look at the addressable market here, in the Design & Planning division, actually, we define where we take away the CAD part and we kind of focus on where we can be active. We define that market to be SEK 25 billion. And we can actually service that with the type of strategy we have today going forward. Within Additive Manufacturing, the total market is some SEK 30 billion, and we say we can address or service SEK 20 billion of that, as we are not part of the production of the machines in themselves. The growth rate here is quite substantial on Additive Manufacturing. And then if we move over to the Metrology side, that business, if we define it as the industrial metrology, some SEK 65 billion. Today, we are active then in an area which we can kind of service with our software, which is like SEK 5 billion. And all in all, as also we said before, the growth rate, if we add all of that together, is more than 10% per year. Our part of that business today is us also Stefan said, small in relation to the opportunity, somewhere between SEK 700 million and SEK 800 million. So now when we are moving into this, how are we then going to be or go about to be able to address it? Well, first of all, we are very much part of the industry we serve. If you look at Sandvik Machining Solution and SMM, Sandvik Machining and Manufacturing solution today, all in all, we have huge number of plants around the world where we actually are doing all these different steps that you can see in a workshop. So we are living in this environment every day. We are part of the industry we serve as we say. And we also speak the language of our customers. We can actually relate to the challenges they have because we basically have the same in our own operation. Nadine also talked about the lighthouse status of IMO, where you actually, can see also in real-life how this digitalization of a workshop really materialize in all the different steps that we are doing there today. How we are building it going forward? Well, actually, we are continuously building our capabilities. If we start with the design and planning area, we are today a very active player in tool management that is to be able to address all these thousands of tools that a normally midsized company have or workshop has in their production. And we can actually then support them, ensuring that they know exactly where the tools are in the process. We've, again, done 2,000, 3,000 tools in the workshop. It's also a matter of all the time knowing exactly where they are, in what shape they are and how that can then be facilitated the process of optimizing the workflow in the workshop. We are also doing a lot of things in terms of bringing this, as I said, initially from the physical world over to the virtual world. We have, for instance, a new software now for vending solutions called RIB wise. We have a new development in our tool data management operation called Global Line, which basically is a software that is cloud-based and really are taking the tool data management to the next level. We are -- from Metrologic, our software company moving into an end-to-end solution in metrology software, all the way from virtual programming of the measuring devices all the way through to data handling when the measurement is being done and then how that can be integrated into production. Those are a couple of examples that we are doing within digitalization. And then, of course, we are also collaborating with quite a lot of different stakeholders. Sandvik Machining Solution, of course, is one. Because we can really be part of supporting each other in this business concept. We are also collaborating a lot with everything from machine tool makers to CAM software providers to different universities, development areas in also the additive part, for instance, all the additive machine makers and then ensuring that we are part of this ecosystem that we are active in and then taking that all together as a combined offer. To be a bit more concrete then in this, we can take a look at some customer examples. Customers today, regardless if they are in aerospace, if they are in automotive or if they are in medical, they are spending a lot of their time to create more sustainable offers. And to be able to do that, they need to optimize the product even more. One very good way to do that is to use additive manufacturing. Because in additive, you can create more complex forms. You can actually also design things in ways that could not be done before. But the most important thing is really also that you can do the part in what we call near net shape. And that means that you -- instead of as is commonplace today for a thing like on the screen here, a blisk, which is a part in the jet engine, on the coal side in the jet engine, where you basically are machining a fairly big part of titanium to this component here. So from a block of titanium to this type of part, you're taking away something like 70%, 80% of the material. Instead, what you can do is that you print it. But once you have printed it, you also have to finish it to get the final touch. We today can through our competence in Osprey, which is then part of Sandvik since many years back, one of the leading suppliers in powder. Through our new inaugurated titanium plant in Sandviken, provide high-quality powder to our customers and also ensure that we give them the traceability and the quality requirement needed. We can get the prototypes printed in our service Shop Co in MIT, where we own a minority stake today. And we can, of course, also, at the end, ensure that our colleagues in Sandvik Machining Solutions take on and define exactly the right tools to be able to cut this part or machine this part. So we can actually serve the customer all the way through the chain of going from the powder all the way through until they have a completed part. Another example is a landing gear. A landing gear is produced out of often forged piece, which is then machined into the final shape and then combined with other different parts into the complete landing gear. A complete set of landing gear can cost anywhere between $2 million up until $7 million for a big -- of the bigger airplanes like the Boeing 777. And of course, when you're producing these parts, it's extremely important that you don't do any mistake during the production process because they are very costly, and it can be very costly if you not really managed to handle the quality in the right way. There are quite a lot of steps in this. You have to go from the design through the CAM, defining then exactly what type of tools you need, ensure that the right tools are available, move it over, ensuring that you select exactly right insert for that particular component to be produced and then machine the part. What we have developed quite recently and what we are in the process now taking to the market is a way to ensure that the customer actually can use and control exactly the right tool for that particular component in the way that in the final stage before we start a machine the part, we can actually read the tool through having a QR code on each individual insert and then you have to realize that every -- we are producing over SEK 100 million inserts or hundreds of millions of inserts every year. So each of them is actually an individual. So we can, on one hand side, provide full traceability of what tools they have used for a particular component, and they can themselves in the last stage before they start to run the machine make sure that they have the right tool in the machine. If I then take another area and look a bit more into the future, metrology, what can we do there? Well, the traditional metrology setup is that you have a coordinate measuring machine. In the final stage, you kind of measure the part that you have produced. Often in the temperature-controlled room and you get it good or bad type of decision on that particular component that you have been that you have been manufacturing. Of course, you can feed that back into the production and tell them that this did not go very well, but it's kind of off-line way of doing this measurement. What, of course, is something that everybody wants to do today is to have a more in-line measurement so that you actually are measuring us, you are producing -- continuously as you are producing. Those of you that were part of the Capital Markets Day in , about 1.5 year back might remember that we had a demonstration there with the measuring device that withstanding side line, as we say, to the machine and actually was able to measure a component that was coming out. This is something now that is becoming more and more common place, even though the previous picture, I show this very much more commonplace in the market today. So it's gradually getting in there. And of course, we can utilize the software that we are developing at Metrologic to address this market. And be part of this journey towards more inline measurement. What is then the future in this is that you will then be able to use the machine tool in itself as the measuring device. And that means that you will be able to basically measure us you are machining. But it's not like that will be done by itself because you still need to have software to be able to control the measurement that is being done. And this is also something that we are working on, which is then the trend that we are going for or towards in the future. As part of that, which is a bit of an intermediate solution, is that when you are taking a part out of a machine, you can basically use the robot by scanning the part as also as a measuring device. And this is also something that we are developing at Metrologic in a solution that we call iRobot. So all in all, and this suite of measurement technology that we are now combining together is then bringing us into the future of the Metrologic or metrology solutions in the workshop. So with that, what we're then targeting from the SEK 700 million to SEK 800 million where we are today, we are targeting to lift that up to SEK 4 billion during this period of time, up until 2025 by combining these different solutions that we have today, adding acquisitions to it and also different types of partnerships. And this is going to be an exciting journey, and we will have to evolve our solutions and our strategy as we go. So if I then wrap that all up and with that, then looking at the total Sandvik Manufacturing and Machining Solutions, how will we then go about this going forward? So Nadine, we need to do this together, right?

Yes. Perfect.

Yes, we need to do this together. And we have our partner from Sandvik manufacturing solution, bringing it up to SEK 4 billion. And then if we summarize it, we have this picture?

Yes. In the digital business. On your SEK 4 billion, we are going to add 1 additional SEK 1 billion from Sandvik Machining Solutions. And then in the total Sandvik Manufacturing and Machining Solutions, we are going to talk about a growth that is having a double pace versus the market growth and from which 50% is going to come from acquisitions. So we are truly set up for growth for the coming years, but not only that, also, of course, securing a resilient business and a truly expanded offer. Thank you very much for your attention.

Yes. Thank you very much.

Thank you for that, Lars and Nadine. Now it's time for the President of Sandvik Mining and Rock Solutions, Henrik Ager, center stage. Henrik? Please go ahead.

Thank you, and welcome from the exciting world of machining into the world of mining and rock extraction. I'm responsible for Sandvik Mining and Rock Technology. But starting January 1, we changed the name to Sandvik Mining and Rock Solutions as we separate out the Crushing and Screening division and make that into its own BA. So today is going to be focused on Sandvik Mining and Rock Solutions, the profile of our BA and our strategy going forward, and importantly, the areas we focus on when we intensify our efforts to grow the business. If I start then with Sandvik Mining and Rock Solutions as an overview or SMRS, as we will call it, you have top left, you have our revenue profile. You can see a similar profile as for SMRT, strong growth in year '17, '18, '19 and now impacted this year by the COVID-19 pandemic. We have been impacted more on the aftermarket. Our equipment sales have held up surprisingly well. And our aftermarket has seen more of an impact and then more on the maintenance side than on our Rock tools side. If we switch over to EBIT, we have the same steady development of an increase -- continuously increasing EBIT margin over the past few years. Those of you who are focused on more exact numbers, and I know most of you are, you will see that we end up at a slightly higher margin without crushing and screening in the portfolio, and we ended Q3 with a 22.1% EBIT margin in what will become SMR. If you look at the sales distribution geographically, you see that we shift slightly towards the east. Without crushing and screening, we have less presence in the Americas and a stronger weight towards Asia Pacific, primarily driven by our very strong position in Australia. If you go bottom left, you see then our segment exposure and application exposure. Similar to before, the split between equipment and aftermarket is about 40% equipment, 60% aftermarket. If you then look at mining and construction, the split is quite different, and we're much more exposed to mining going forward with more than 90% going into the mining industry. And when you look into mining, you can see that about 60% is going into underground hard rock, and then the remaining 40% or thereabouts is split between underground soft rock, which is mostly coal and some potash, and phosphates, and surface mining, which is, for us, is sort of drilling with the associate aftermarket. Now given our strong focus on mining, I'll take you through what we see as the most important trends shaping the mining industry now and going forward. We start on the top left, we see different development for different commodities going forward. If you look back the last hundred years, you would see the most commodities have developed in sync over time, primarily driven by GDP. Going forward, we do see a different development with electrification, driven minerals growing faster, while other minerals and especially coal growing slower. Second is the drive for productivity. And this is a continued drive for productivity of our customers. This might seem like an obvious one, but it wasn't back at the start of this century. So 2000 to 2011 '12 or thereabouts, the focus was more on volume and less on productivity of the equipment. Since then, it's been more on the productivity equipment we like that. We pride ourselves in making some of the most productive equipment and service solutions for the mining industry. So we like this trend going forward. I'll come back to that as well. Now part of that productivity focus comes from new technology. And automation and digitalization is a big part of that, automating the production process in mining, digitalizing it, connecting the equipment, collecting data, analyzing it and driving more insight to be able to maintain it and run it better. Number four is the focus on energy efficiency and electrification. Again, this can help make mines more productive. Mining is a very energy intense process. And if you can make it more energy efficient, you make it more productive. By switching to electric equipment, we take diesel out of the mines. So we take heat out, and we take the need for ventilation out. We can also, if we have the right source of power, improve the CO2 footprint of the industry. I'll get back to both of these technology trends shortly. We do see a geopolitical rebalancing with the center of gravity or the center of GDP gravity, shifting east. Now if you were to go back 2,000 years, you would see the center of gravity for GDP was west to east somewhere around Afghanistan. 1,500 years later, it was in the same place. Then it started to move west. And by 1960, what's around Iceland. Since then, it's moved back with the emergence of first Japan, South Korea and Taiwan, Southeast Asia and China, then it's moving east. It's now well east of Moscow. By 2025, it's projected to be back in Afghanistan, and that affects us, of course. Secondly is a trend of more nationalism, less free trade than what we've seen in the past. And we need to adapt to this development. So we adjust our supply chains to allow us to produce more locally where that's required where trade barriers are being built to necessitate us to do that. Then last is our customers' need for sharing operational risk and have us take on more risk, more of the operational risk. That can be in terms of spare parts consumption. Where our customers see that, that goes up and down a lot for them and it impacts their numbers, and they appreciate when we take on some of that risk. And there are other solutions, be it financing or others, where our customers are looking for us to take on more risk. We're happy to do that. Obviously, we -- this should be calculated risk and well-managed risk exposure for us. But we need to find more and more of those solutions. Now with this as a foundation or a backdrop, I'd like you to take you through the 5 focus areas we have in our strategy. If we start with our vision, it is to be the partner for our customers to make them more productive, to make them perform better. And we see 5 key areas for doing that. The first is to be safe and sustainable. That's for both our own operations and for the products and the operations with our customers. For them to be more sustainable. Now a lot of that comes from productivity. If we can help our customers be more productive, that will reduce their energy consumption and it will make them more sustainable, reducing their CO2 footprint. Second, delivering customer value. Now first of all, we have to understand where that value is and work with our customers to jointly have a joint view of where that value is and then make sure we go after and capture it. A lot of that sits with our aftermarket, having the right people, the right technicians at customer site or close to customer site, being able to go there or being remotely supporting them to make sure that we maintain our equipment as well as possible, make sure it runs. We sell production-critical equipment to our customers, it has to run all the time. And being there and being close is a prerequisite for that. And we'll keep investing in local infrastructure to make that happen. Third is shaping the industry ecosystem, and this comes back to automation, digitalization and electrification. And I'll get back to those in a second. Fourth is having an agile organization being able to swing up and down with the market and adjust our cost base as the market goes up and down. We're very proud of the results that we've achieved this year when the market has been swinging a bit and a lot more than we expected. And we will continue to focus and invest in solutions to make that happen, be that through outsourcing or other means. Then finally, Stefan mentioned, we need to step up the pace when it comes to acquisitions and partnerships. What you see here on the picture is a drone. And this is a partnership that we recently signed with a company that delivers technology for having drones, underground mapping, underground mines and making 3D maps of mines underground. It's a lot faster, easier and safer than doing it with vehicles and people. Now from the strategy, we want to drive growth. And I want to then zero in on the key sources of growth for us, and there are 5 of them, and I'll talk you through each of them and give you an example. First is the focus on faster-growing commodities; second is grow our share, our market share in our core business; third, expanding our aftermarket offering; fourth, is leading the automation, digitalization and electrification; and fifth is then accelerate M&A. Let's take them one by one. If I start with the world of commodities and trying to simplify it from our standpoint as equipment supplier. And what's important is how much material is being drilled, blasted and moved, loaded and hold, it doesn't matter if it's for iron ore, gold or platinum. But if we then look at the global market, then we move about 19 billion tonnes of material in the mining industry. And when we divide that, we find most helpful to divide it into 4 categories. First, we have the electrification driven minerals. These are the minerals that get higher demand growth from the electrification of societies. That's primarily copper, nickel, zinc and lead. It's obviously also cobalt and lithium. And although they will see strong growth, they're quite small in the context of 19 billion tonnes of material. Then we have gold in a separate category because it's so big, driving a lot -- gold is actually the one mineral that gets help from uncertainty in the world. Then we have -- we call them the bulks. This is iron ore and coal. This is the biggest volume and you can see it accounts for about 60% of the industry as a whole. And then we have the others, which is platinum group metals, potash, uranium, silver, et cetera. Now if you see, our exposure is very different to the industry as a whole. We're much more exposed to the electrification minerals and to gold than we are to the bulk of the industry as a whole. If we then look at the expected growth rates, they are higher for electrification and for gold than it is for the bulks. It's also higher for underground applications. So if we put all of that together, we see that our underground underlying market is expected to grow about 3%, whereas the industry is expected to grow at about 2%. Second, if we shift to growing our core business of growing our market share in our core business. Our biggest opportunity is in surface drilling. This is valid for all of our business, but the biggest opportunity for us is in surface drilling. We have a new offering in rotary and down the whole drilling, DTH, that we haven't had before that's competing head on with the strongest competition out there and doing very well in -- performance wise. We're launching an extra-large top hammer drill that is also going in competing with those down the hole drills. Then, Performance Rock tools and so on to deliver the best productivity and total cost of ownership. With this comes, of course, automation solution for the surface drilling and the local support, the local expertise on site. Second, expanding the aftermarket -- or sorry, this is third, expanding the aftermarket. Now this, of course, starts like equipment with the products. We've got to have the best products and solutions. Second is the expertise close to or at customer. Third is connecting our equipment and -- connecting our equipment, collecting the data and adding more and more analytics and artificial intelligence into those analytics to be -- to allow us to maintain it better than everybody else, securing our aftermarket. And last is having new business model for the aftermarket. The example here is a battery pack, a battery pack for one of our battery electric vehicles. Now we sell that battery as a service. So instead of having a big CapEx upfront, you pay for it like you pay for fuel as a service. Moving forward, I'd like you to go a little bit deeper into electrification and automation. What you see on the left-hand side here is our 50-tonne battery electric truck. And what you see is that this truck is able to swap its own battery. And that is important because in the mining environment, the production facility moves. It doesn't stay in the same place like any other factory. It moves as we mine out the ore body. So then it's important to be able to move charging stations and battery packs around. And just out of curiosity for those interested, that battery pack is about 9 metric tonnes. So it's 9-tonne battery that's been loaded and unloaded. This is now running at faster, but you can see it takes a little bit more than 6 minutes to change the battery. So it takes 2 to 3x more than fueling an equivalent track with diesel. So doing it this way allows our customer to run with electric equipment and start with that much easier. We just signed a cooperation partnership with Barrick, the biggest gold producer in the world to have 4 of these trucks in their operations in Nevada, operating wave 1 operating already, and we've got 3 more coming. So we're very excited about that. Next is our automation solution. And what I'll show you here is a glimpse of our -- the next-generation automation solution. Those of you who were in Tempur 18 months ago might remember that we said, well, in 2016, we had 90 automation solutions installed in 19 sites. Then 18 months ago, we had at 43 sites. Now that number is 59. That's the current generation. The next generation, as you see here, you see it's a loader without a cabin. But the most exciting thing about this next-generation automation solution is that it can exist with other equipment and with people in the same place, and it can determine by itself through AI and how to get from point a to point b and identifying objects along the way. So very excited about this concept. Obviously, it's an electrified loader. And we're very excited about testing this next-generation of automation and collision avoidance, which is critical for safety, of course. Then last, but not least, stepping up the pace for M&A. We made some M&A over the past few years. You see the 3 on the left-hand side here with Artisan, Inrock and Newtrax. We've also formed more and more partnerships, especially in the automation and digitalization arena. We're going to step up the pace of doing this. We are adding a couple of resources, and we're moving faster to make additional acquisition, be that as complementary technologies or bigger businesses, we're, of course, looking at both. So if we take this all together, we have the 5 key sources of growth for SMR going forward. And our expectation and our ambition is to grow by more than 2x the market growth of 3% per year. Thank you very much for listening and looking forward to your questions later.

Thank you very much, Henrik. Next up is Anders Svensson, President of our newest business area, Sandvik Rock Processing Solutions. Hello, Anders, you are joining us virtually today.

Hello, Emelie.

Hi. We're looking forward to your presentation. Please go ahead.

Very good. Thank you very much. Hello, everyone, and welcome. My name is Anders Svensson, and I'm currently heading up the crushing and crushing screening division within SMRT, and I have done so for the last 5 years. From the first of January next year, I will be the new business area President for the new BA cx Rock Processing Solutions. I'm going to start by giving you a brief of this new area. We consist of 4 divisions: stationary crushing and screening; mobile crushing and screening; attachment tools, which is our hydraulic breakers division; and then a joint venture in China called [indiscernible] . During the last 5 years, we have been running a turnaround focused on improving stability and profitability within crushing and screening. And we have -- despite that turnaround, managed to deliver an underlying compound annual growth rate of 6.5%. COVID-19 hit us, of course, in 2020, like everyone else, and some of the key effects we have had is that it's difficult to come to customers' sites. And customers also delay or postpone CapEx investment and projects. And customers only do the critical services and critical maintenance. We saw a recovery in Q3, price volume-wise, but we had significant negative effect from currency in the quarter. Our EBIT journey was from breakeven in 2015, up to 15.9% in 2019. And through permanent and temporary measures, we will deliver a similar EBIT level for 2020 despite the COVID-19 situation. And by last, we believe that we are in the top-tier in the industry. Our reported return on capital employed for 2019 was 25%. On the slide, you can also see our sales exposures by segment. We are 55% construction and 45% mining. We are fairly even between equipment and aftermarket. Aftermarket, 52%. And on the right-hand side, you can see our geographical exposure, where we are largest in EEMEA and the similar size between APAC and Americas. Here, when we look at our market growth and outlook. Henrik went through growth rates in a good way in his presentation, so I will be quite brief. The mining industry average growth is projected to be around 2% up until 2025, and the construction industry average growth rate is also expected to be around 2%. As we also have a high exposure towards faster-growing commodities such as electrification minerals and gold, but also within construction for aggregates and to some extent, tunneling, we have a weighted market growth outlook of 2.5% to 3%, as Stefan mentioned in his presentation. Next, we will look at the industry demand drivers. Our customers want sustainable rock processing solution that is eco-efficient, cost competitive and that digital services provides operational insights for better planning, forecasting and in the end, better productivity. In mining, eco-efficient comminution technologies are getting traction. As customers focus on waste, energy and water consumption. In coring, we see similar trends and due to productivity targets, EHS regulations and sustainability demands, there is a consolidation into larger operations. To support these changes in the market, there is an increased demand for digital services, for operational insights and productivity gains. From the demand drivers, we have developed our strategic focus areas. Creating safe and sustainable operations is always #1, both for us and our customers. We have a life cycle perspective in everything we do. This means that we aim to support our equipment with the best services and solutions throughout the life cycle of the equipment. We target to drive ecoefficient solutions through our own operations, our offerings, performance at our customers' operations and our products at Head of Life, equator to grade perspective, you can say. To do this, we, of course, need exceptional people that are agile in executing everything we set out to do. And the last one, we target to evolve our offering portfolio, both organically but also through acquisitions or partnerships. With our strategic focus areas, we are set up for accelerated profitable growth. In the next few slides, I will elaborate a bit on a few of those key growth initiatives. The first one is to expand our aftermarket offering. We aim to deliver, as I said, the best solutions and services through the life cycle of our equipment. And by this, we mean in terms of ecoefficiency, operational insights, productivity, and so is our cost of ownership for our customers. There are, of course, many initiatives that we are working on in our offering of aftermarket products, both within hardware and software. But one example that you see here on the screen is our reborn offering. Here, we can take a worn out unit; we replace the worn out in critical parts; key parts that we can reduce; we have the latest technologies, features and services. And then the customer can get improved productivity with the new equipment, and we can also have an environmental-friendly solution. When completed, the customer will have also a new warranty. And as we offer the best solutions for aftermarket for our products, through the life cycle, we target to increase our aftermarket penetration rate by roughly 30% up to 2025. Acquisitions and partnerships. We are looking to go for complementary acquisitions of strategic partnerships in core and in adjacent technologies and all markets. This will enable us to provide better solutions for our customers within our existing operating range, but it can also enable us to target a larger part of our customers' value chain within what processing. And on the side, you can see the 2 latest examples. The acquisition of Allied Construction Products was closed this year on the 1st of October, within our attachment Tools division, it is providing us with a good U.S. footprint and enabling us to service our customers in a better way also with a larger portfolio. Hitachi is one of our selected strategic partners within developing our digital service offerings, especially within artificial intelligence functionality for operational insights. And this will allow us to service our customers that will improve their forecasting and planning processes and in the end gain productivity and cost advantage, of course. And we will continue to acquire selected companies and partner with others to support our strategic growth ambitions. Sales channel optimization is key for us. We have 3 sales channels to market. It's our own direct sales channel for our own people; we have a distributor channel where we partner up with companies; and we have our OEM channel, where we manufacture equipment, aftermarket parts and service packages that our OEM customers sell under their own brand. The indirect channel give us, of course, an extended reach into markets, but we need now to enable our indirect channels to sell also life cycle services and solutions by working close with them, providing trainings, you're planning together and follow-ups together. This work is, of course, key for the end customer. Otherwise, I want to get the right experience from having Sandvik products. And of course, also, they won't be able to enjoy the full basket of benefits that we can offer. So this is really critical. And the importance of this is further growing as we develop more complex offerings within digital services and even new business models. It will require an investment from both our side and our partner side, but the growth potential is significant. Automation and digitalization. It's enabling our hardware to deliver the maximum customer value over the life cycle. On the slide, you can see our 800i come crusher range. It is a fully automatic and connected range, and we can launch all of our digital services on this platform going forward to enable optimization of our customers' operations. For example, that you can set an end product size, and during operations, of course, the crushing chamber will wear and the crusher will then automatically adjust to produce the same end product size continuously. Another service is Edam. When you get an uncrushable object into the crushing chamber, the crusher will not beat itself to death. It will feel that there is an uncrushable object. It will open up, let that object through. And then close again and continue to produce the set and product sites that you have decided on. With digitalization, we developed a range of different services. Can be a simpler one, like chat functions, digital logbooks between shifts, condition monitoring, et cetera. But it can also be artificial intelligence-based ones, such as predictive maintenance, remaining useful life of pain predictions and remote support. Today, 10% of our customers are using digital services, but we target to have over 60% of our customers using our digital services by 2025. Last, but definitely not least, we want to establish ourselves as the market leader within ecoefficient rock processing, not only because we are nice people, but doing this right, it's very good business. We look at ecoefficient rock processing in several dimension. Some of those are material technologies. We want to have the best suited materials to produce products with increased life and improved performance. We have fine crushing within mining. If we can do more fine crushing, we will reduce the need for a higher energy and water consuming technologies for the downstream. We have automation and digitalization. I already spoke a bit about that, but it's to improve planning and optimize customers' operation and to increase productivity and hence reduce downtime and waste in the process. Then we have our trade and to grave approach. Starting with the birth of our products, we want to reuse or remanufacture or use recycled raw materials, as the example that Stefan mentioned in Svedala Foundry, where we used 91% recycled material. And during the life of our products, in our customers' operations, it's key that our solutions perform according to their expectations in terms of performance, et cetera, but also that we minimize waste and energy and water consumption. And then in the end, at the end of life, our products should be refurbished, remanufactured or recycled to the greatest extent possible. So as a summary, we believe that we are set up for an accelerated profitable growth journey going forward. And our ambition is to grow more than double of our market growth. And with that, I want to thank you for listening. Thank you very much.

Thank you very much, Anders. It's time for another short break. So see you again at 3:55 p.m. CET. [Break]

Welcome back. Hope you had a chance to get some coffee. Now it's time for our last business area presentation. Göran Björkman, President of Sandvik Materials Technology. Please go ahead.

Thank you, Emelie. Welcome to this Sandvik Materials Technology part of today's Capital Markets Day. My name is Göran Björkman, and I'm the President of SMT. The picture on the slide you see here is from our production unit in Palm Coast, Florida, where we make medical wire, also known as [indiscernible] Medical Wire. Medical segment is one of the interesting growth segments for SMT that I will address further in this presentation together with industrial heating renewable energy and also our move into more high nickel and super alloys. These are examples of the tiny wires we make in Palm Coast. They're for different kind of applications such as vascular therapy, sensing and also neurostimulation, a fast-growing segment. Now we see images from our largest production unit. It's in Sandvik and here in Sweden. We are a true niche player. We make less volume than most other steelmakers. But on the other hand, much more high added value products. More than 80% of our raw material is recycled steel. That is a high number considering our product portfolio. This is also something we certify for our customers. So high amount of recycled steel, fossil-free electricity makes our metallurgy process highly sustainable. So to conclude, we are a true niche player with a sustainable metallurgy, delivering high premium products. Let's dig into some numbers. I think we have, since the end of 2017, shown that we really can drive profitability. Through an improved culture of commitment and execution, we have significantly improved the performance of our divisions. We're driving a footprint program, and we're constantly improving our commercial and operational excellence. This made us reach the 10% target for 2019, a target that was announced at the Capital Markets Day in Germany 3 years ago. Let's look into 2020. 2020 started in a good way in the first quarter. But then in the second quarter, we were badly hit by the corona pandemic downturn. We have now had 3 quarters -- no, sorry, 2 quarters with an order intake below minus 30% price volume. From the beginning, all segments and all markets, excluding medical, were affected. Now we can see in the end of third quarter that the more short-cycled businesses within Strip and Cantal, there we start to see recovery and good sequential growth. While, however, segments like oil and gas and aerospace are -- continue to be very weak. We entered into 2020 with a strong order backlog. That has made us not drop as much in revenue. So the revenue drop is only around 13%. We have, however, mitigated and defended our EBIT margins, I think, in a good way. We started with mitigating actions before we knew the full impact of this downturn. These are actions like work time reductions, reduction of temporary employees, layoffs, structural measures and, of course, also spend reductions. So in quarter 3, we managed to almost have the same margin as we had quarter 3 last year, despite negative FX. I think that is an impressive leverage from SMT. The same time, we have reduced net working capital and CapEx spend, delivering a strong cash flow. With a negative book-to-bill within Tube and the continued poor projections for oil and gas, we believe that 2021 also will be a challenging year for SMT. But we will continue with the mitigation, and actually on a higher pace in 2021 than it has been in 2020. Looking at some important demand drivers for SMT. The energy demand in the world is constantly increasing. And also the shift towards fossil-free sources and energy efficiency puts requirement on new technologies. With a growing and aging population, the demand of new technologies for health care and medical devices are increasing. The customers will need lighter and stronger materials, materials with higher corrosion resistance and that can withstand higher temperatures and higher pressures, and I think that's where we come in. We are a materials technology company, and I am confident that these global trends, over time, will be to the benefit of SMT, where we will be able to advance our customers to become more sustainable and more efficient, which brings me to our strategic direction. We are, and we intend to continue to be the materials technology leader in our industry. We will defend the strength in that position by investments in R&D and new technologies. We have strong internal expertise in materials, and we have long-term relations with customers and good positions in many growing segments. So the important part of the SMT strategy going forward is to start generating growth at another level that we have done before. We are I think, already now, when it comes to profit levels, financial leaders in our industry. However, as I already mentioned, growth needs to be strengthened. The downturn has also shown the importance of cost flexibility. We are in a volatile business, and we need to embrace that. We cannot change that industry, but we can change ourselves. So we need to even more focus cost flexibility going forward. Also like to comment on the decision that the Board took a few weeks ago to continue with the listing of SMT. As already said, I think we are well-performing in our industry. But we are an industry with, in average, lower margins and also it's more capital-intense than the rest of Sandvik Group. This means that even when we are performing well, we are perceived to be low performers. And that is, in the long run, not good for the company, it's not good for its organization. So I welcome the decision to go for a separate list of SMT. It removes many years of uncertainty that has surrounded SMT and gives us a clear direction going forward. Before moving into what I would say, our growth bets, I need to comment on oil & gas. Oil & gas is, today, maybe the most important segment for SMT. And no doubt, short term, we have challenges with oil & gas. It's easy to see that. But it will recover. I don't think it will recover next year. Probably in 2022 or in 2023. If you just look at this segment on a more midterm or long term, I believe you need to look at the oil & gas separately since there are different demand drivers for oil & gas. Oil is very dependent on the transport sector, while gas is mainly used for electrical power generation and industrial heating. Oil will eventually suffer from the electrification in the transport sector, while gas will grow with the increased need of electricity. Gas can also play a role bridging from worse, fossil sources like coal or oil into the fossil-free sources. Eventually, the gas growth will decline due to the growth of wind and solar. We believe that after the recovery. We will have a growth in oil & gas up until 2030 and maybe a decline between 2030 and 2040. And over this time period, gas will be an increasing part of our portfolio. SMT, we will continue to focus on the oil & gas segment. We will defend and also strengthen our position in umbilicals, including the development of a new super-duplex grade. We will also increase our market share for production tubing, mainly by increasing our materials portfolio and also increase our manufacturing capabilities. I will now go through 3 growth segments: industrial heating, medical and renewable energy, starting with industrial heating. All the industries are moving towards more electrification, and in this case, electrification of their heating processes. So this is an area where we will focus growth. We will continue to develop new products. It's also an area where this gas-to-electric transformation will be of interest. Today, it's smaller furnaces, but we will go from, I would say, a kilowatt to megawatt applications. Industrial heating is also an area where we will not only grow organically, but also inorganically. So our M&A focus is to continue with our forward integration, acquiring regional heating element suppliers and also strengthen our market position, mainly in Asia and in North America. Medical. As already mentioned, medical is a fast and stable growth segment with high margins. And we intend to increase our market share within the medical segment. Both by organically through increase our wire forming and coating capabilities, but also, here, a strong M&A focus. The M&A part will mostly be about adding capabilities that we don't have today to move in the value chain, also increasing our product portfolio. Renewable energy. That's a fast-growing segment. And to a large extent, it is supported by governmental policies. For a full transition into fossil-free sources, system enablers like distribution and storage needs to be developed. We will, of course, focus on some of the energy sources where we can play a role. I'm thinking about solar power, biomass, geothermal, but we also have the intention to take a leading position within materials technology for the system enablers and where we mainly will focus hydrogen and batteries. We share with you here an interesting customer example when it comes to renewable energy. We have worked together with a Dutch customer, and they have designed and built the first supercritical water gasification. So what is that? That is an industry where you produce syngas from wet biomass. Syngas is a mixture of carbon monoxide and hydrogen used in many chemical applications. This is a very demanding environment, and we have been able to find a solution together with a customer using our Sanicro 25 grade. I think this is a good example where materials technology can play an active role enabling technology development. And last, but not least, maybe the most important part of our organic growth. Traditionally, we are a stainless producer, mainly with austenitic and duplex grades. But we are now moving into the area of high nickel and super alloys. This has become possible through a lot of process development within our metallurgy and hot work and processes and excellent work done by our R&D and process experts. On top of that, we have just recently launched a Sandvik-invented new grade, it's called Sanicro 35. It's a grade that bridge -- is a bridge between stainless and high nickel. It has excellent both corrosion and mechanical properties at high temperatures. But this may -- while this is for the customer, it makes it possible for the customer to use a more, let's say, less costly solution due to its lower nickel content where they before had to go for high-nickel solutions. This, as I said, important part of our organic journey. So thank you. And if you are hungry for more, in this picture, you see the world's fastest pizza oven. It's designed by technicians in the division control. And it can bake a pizza in 37 seconds. And if you're interested in this or other stories about SMT, please look at our website. Thank you.