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

Welcome to Sandvik's Capital Markets Day. Welcome to you who are here, and of course, equally welcome to you who have joined us via the web. I must admit we are a bit extra excited to host this particular Capital Markets Day, of course, because of the topics we will cover. But also, we have been facing restrictions for so long, all of us, and it's therefore such a pleasure to see so many of you having been able to join us here at Epicenter in Stockholm. And we will have the full afternoon together. Here is the agenda. I will soon invite our CEO, Stefan Widing, up on stage. Stefan and Cecilia Felton, our CFO, will take you through our Shift to Growth strategy, where we are today and what we have achieved so far, and also of course our increasing ambitions, including the new financial targets. You will listen to our BA President, also of course covering the same topics, but also a deep dive into their specific strategic priorities. After each presentation slot, we will have a short Q&A session. We will prioritize of course the audience here. But if time allows, we will also take questions on the conference call. Note that we do have a group Q&A in the end. And here, we actually devote the last 10 minutes for questions on the call, if needed of course. I think that this is it for me. I hope you will enjoy the day and that you are energized. We are, for sure. So let's now welcome our CEO, Stefan Widing, up on stage.

Thank you, Louise. And it's great to see so many of you here today as we will talk a little bit about our strategy, what we have achieved so far and our ambitions going forward. And as Louise said, I think you will find also the BA presentations very interesting with a lot of new and interesting information relating to all of our businesses. Sandvik. Of course, like any other company, we need to adjust and adapt our strategy to the world and the context in which we operate. And there are a number of global trends that impacts our business. We have, first of all, of course, sustainability. Sustainability, and in particular of course electrification, which has a lot of opportunities for Sandvik as a company. We also have economical developments in the world. We have a growing middle class, which is positive for the demand of Sandvik's products. But we're also facing, of course, the economical consequences right now of a global pandemic. We also have geopolitical developments. Now we have a war in Europe. And we have, for a number of years, faced trade barriers which has impacted the way we operate our business. We also have technological breakthroughs. And for us, as an example, the continuous development of battery electric vehicles is both a fantastic opportunity for us as well as a headwind that we will face in some parts of our businesses. Then of course digitalization and connectivity, with software playing an increasingly important role in most industrial companies. And connectivity, which will allow us to advance and develop our business models. And in this world, we at Sandvik has defined our role, our purpose, to be part of making these shifts and help advance the world through our engineering capabilities. And we do that also supported by our core values: Customer focus; innovation; to play fair; and my own personal favorite, a passion to win. And these values has been with the company for a long time, and they are well ingrained into our culture. To make this shift, we have defined our strategy based on 6 strategic objectives. There are 3 shift objectives: The shift to growth, the digital shift and the sustainability shift. And then 3 supporting objectives: To be an employer of choice, to be our customers' first choice and to be agile through the cycle. For each of these 6 objectives, we have defined specific, concrete targets where we want to be in 2025. And each year, we define what we want to achieve in that year, and by each quarter. This is to drive strategy execution. And we are convinced that if we can deliver on this strategy and these goals, we will deliver profitable growth, providing value for all our stakeholders and ultimately, for our shareholders. And we have a strong foundation from which -- let's see. We have a strong foundation from which we execute this strategy. As Sandvik Group, we have world-leading positions in the market segments in which we operate. We have a winning culture in the organization. We are leading our industries in the digital transformation. And we have sustainability embedded into our business models. All of our businesses work closely with our customers. In many cases or in most cases, we have a direct sales engagement. We understand our customers' needs, and we work to helping them become more productive, more efficient and thus more sustainable. So for us, sustainability is embedded into the core of our business models. I will now take you through these strategic objectives briefly and what we have achieved since we met last time. And I will start quickly with the supportive objectives. First of all, we want to be an employer of choice and to have exceptional people with a winning culture. And we believe this is crucial because there is a war for talent, and Sandvik will need to attract, retain and develop new talents to be able to execute on our strategy. We introduced last year a quarterly employee survey which has been a big success, and we can see increased participation rates quarter-by-quarter, and allows us to understand the health of the organization. Currently, we have an employee engagement rate of 79%, which is a good score and something we strive to continue to evolve. We also focus on safety, and we have one of the industry's leading safety performances. Last year, we had a total recordable injury frequency rate of 3.5, so that's per million hours worked. This was actually not our best year. Our best year was in 2020. So we are now working towards getting back to that strong performance. But again, this is already a leading data or statistics in the industry. We also work with customer focus, and all our divisions are engaged in programs to ensure they understand their customer satisfaction, working with structured methods to understand and improve what our customers think about us. And then agile through cycle, where we have a tough margin target up until today that we have delivered upon through a global pandemic. We have, also, as we have now been ramping up in the recovery phase after the pandemic, worked hard to ensure that we build new capacity through flexible cost structures, to ensure that we can be even more responsible in the future in the event of a new economic downturn. But being agile through the cycle is not just about flexible cost structure, it actually starts of course with the top line. That is why several of our businesses are working a clear strategy to enhance their aftermarket offerings and grow aftermarket and consumable businesses. And those businesses are today at an all-time high level. Our software offerings also play into this. With software revenues come either recurring maintenance contracts or Software as a Service contracts, both which are at least as good as the aftermarket business in terms of resilience. If we look at our shift objectives, there is a lot to be said about those, but I want to highlight a few things. We have of course had very strong organic growth, 5 consecutive quarters of double-digit organic growth. But on top of that, we have also added over SEK 10 billion in strategic inorganic growth in 2021, basically fully compensating for the spin of SMT. These acquisitions have been handpicked and strategic to ensure we either strengthen our core business or expand into adjacent value chains that we believe will strengthen the overall business. One part of this has been to expand our digital offering. And last year, our annualized sales of software and digital was SEK 3.3 billion, up from below SEK 1 billion only a year prior to that. And on climate and sustainability, we have a goal of reducing CO2 emissions by 50% until 2030, based on a benchmark of the years between '16 and '19. We are so far at minus 44.1%, so well on our way to meet that target. So we are making this shift. We have enhanced and focused our core business. The focus, of course, taking a big milestone through the spin of SMT as Alleima. We have expanded in the value chain, we have expanded our digital offering, and we have embraced sustainability as part of our business model. Let me take you through a few achievements in these areas. If we talk about strengthening our core business, you will see SMS talking about the strategic priority to become the market leader in round tools. We have added in the past few years SEK 2 billion in revenues in round tools, making us -- taking us on a path towards market leadership. When it comes to growing our aftermarket business, last week's announcement of our intention to acquire the Schenck mining business is a big milestone. This is a SEK 2 billion business with 70% market -- 70% aftermarket. It will make a step change in the aftermarket exposure of Sandvik Rock Processing Solutions. And we are broadening our solutions offering through digital. And here, we have a goal that by 2025, across our group, we should have SEK 6.5 billion in sales from software and digital offerings. Another example of growing through the value chain is specifically in underground mining. Here, the acquisition of Deswik makes us the market leaders in mine planning software. The acquisition of DSI made us the market leaders in ground support. Both of these adds crucial steps in the value chain of underground mining. And of course, Deswik also contributes to our digital target. And DSI, being 100% an aftermarket consumables business, also contributes to our resilience. And the digital shift, of course, impacts a lot across the board in our business, including a lot of internal aspects. But it is first and foremost driven by our customer needs. And Sandvik is in a unique position to take specific position in software and digital in the industries where we operate. We have a world-leading footprint in hardware solutions. Levering that, we can make these software assets grow faster than they could have done on their own. We can create joint solutions that are stronger than each solution would have been independently. And our software offerings will also help drive the hardware business because, in many cases, these softwares are sitting earlier in our customers' value chain at control points where hardware selections are either made or can be influenced. When it comes to sustainability, it is integrated into the whole value chain of our business. It impacts our customers, our own operations, as well as our customer offerings. As I already mentioned, when it comes to Scope 1 and Scope 2, we have a target to reduce CO2 by 50%, and we are already at minus 44%. And last year, we signed up for the Science Based Target initiative, which means that these targets and this progress will also be validated independently by a third party. But I believe that the biggest opportunity for us when it comes to sustainability is actually in our customer offerings. And you will see that throughout the presentation today. I just want to highlight a few examples. In Rock Processing, we have our Reborn crusher solutions, where a customer can get basically what amounts to a new crusher by replacing wear and spare parts with a significantly lower footprint from an environmental perspective. SMS is launching the data matrix or the digital tagging of each individual product. Here, we go from labeling a package when it leaves the factory, to early in our production process, marking each product. This means that we can make our own production process more efficient. We can provide our customers with data related to each individual insert or product, for example, giving them higher tolerances, improving their operations. It also means, in our recycle program, where we buy back these products, we will know exactly what the material content of each product is, also enhancing that step of the value chain. I believe we are only in the beginning of understanding what business models and the benefits this type of solution will provide for us and our customers. And then of course we have our battery electric mining equipment, which you will hear more about today as well. Here, we are continuously launching new products. We see a strong demand in the market. And we have patented unique technology that are years ahead of the competition. And this shift is working. We can look at our revenue and order intake. We have had 5 consecutive quarters of double-digit organic growth. And in the past 3 quarters, we have also added a strong component of inorganic growth. And although these numbers exclude SMT of course, you can see that we are, on a rolling 12-month basis, well above SEK 100 billion, the level that Sandvik has never been in at before. We also see on the margin and profitability. Excluding the trough during the pandemic, the margin has been sitting at about 20% EBITDA. And in the past 2 quarters, we have had a margin or a profit of over SEK 5 billion, a level we have never been at before at Sandvik. So the shift strategy is delivering also on the numbers. So we are delivering on the targets we have from before. We had to grow -- we had a target of growing at least 5% through a cycle. We have been through a pandemic. But still, we have delivered on that target since 2016. We had a trough margin target which we have delivered upon. And last year, we were at 18.3% EBIT for the whole group. We have a balance sheet target, and we are currently at 0.35 in our gearing. And we have a dividend payout ratio of 40% versus a target of 50%, the main gap here coming from the pandemic year of 2020. So as we have delivered on our targets, you have already seen that we have now increased our ambitions. By enhancing our core business, expanding in the value chain, expanding our digital offerings and embracing sustainability, we are ready to increase our growth target to 7% through cycle, inorganic and organically. We have set an adjusted EBITDA range between 20% and 22%. I want to emphasize, though, this is not a peak to trough target. Cecilia will explain more how you should interpret this target in her session. We have also changed the definition of our debt target to be financial net debt over EBITDA, and that should be below 1.5, representing a fairly conservative target, still giving us room to continue to grow. This is roughly the same ambition as before, but it is in a new format, if you will, and more easily understood and more commonly used. And we have kept the dividend payout ratio of being the same at 50%. I want to talk a little bit more about the growth target. You will see in each of the business area presentations that they will also show you what their growth targets are. The group growth target is not for a specific period in time, it's just through cycle growth target. If you will, in perpetuity. The business area targets are based on 2019 to 2025. Those targets, we want to be actionable, and they will show you where and how they will achieve them. If we look at the business areas then Sandvik Mining and Rock Solutions has a target of growing 10%. Rock Processing also by 10%, Machining Solutions by 5%. And Manufacturing Solutions, well above 10%. If you do the math there, you will come to a number above 7%. Here then again, our group target is a through-cycle target. We have been through a phase where we have been using part of the balance sheet capacity. But of course, long term, the inorganic growth component will be driven by our cash flow generation. So if you would summarize the group target for the same period, you will maybe arrive at a different number than the long-term group growth target. When we talk about growth targets in the current environment, of course it's also important to consider inflation and price. We have decided to have a growth target based on what we could call a historical and nominal inflation rate. It doesn't make any sense for us to try to speculate what the inflation will be in the future. We have market-leading positions. We have a differentiated offering. We typically work with value-based pricing. So we believe that whatever the inflation will be, we will be able to offset that through our own price increases. Of course, if prior -- inflation is high for a sustained period of time, also our price component will be higher, and then the target will have to be revised. But that context is important to understand. There are some of our businesses with order backlogs that might see a lag between price and cost inflation. And you have seen that in the past couple of quarters. We are confident that it's just a matter of time before we can catch up. And here, I also want to highlight that SMS is of course more protected from this through their vertical integration. They are not insulated from cost inflation, but they are helped both on the supply chain side and on the cost inflation side. And this many times, the vertical integration in SMS is seen as a negative because of the higher fixed cost it gives, I want to highlight that in a world we're currently in, it's actually a strength. When it comes to our sustainability targets, they stay the same. We will continue to work with fair play and compliance programs, with our vision of Zero Harm, where we are already industry-leading in our safety performance. We'll continue to focus on circularity, where our goal is that 90% of the input material to our products will be recycled by 2030. And we will reduce our CO2 impact by 50% until 2030, and now also backed by the Science Based Target initiative. So Sandvik's transformation journey continues. We believe we have a strong platform across the group to build from. We are successfully executing on the shift strategy. By doing that, we have enhanced the growth profile and the resilience of the group. We have increased our ambitions now through the new financial targets. We are executing towards 2025. But I want to assure you, if you're a long-term shareholder, that we're not only looking at 2025. Everything we do, we also keep an eye towards 2030 and beyond to ensure that we always build Sandvik to be stronger in the future. And with that, I think we should focus even more on the numbers. So I will now hand over to our CFO, Cecilia Felton, that will take you through some more details.

Thank you, Stefan. Thank you. All right. So what we'll do now is to go through the numbers in a bit more detail than what we normally do during the quarterly presentations. And we will look at the financial development from 2018 onwards and also talk a bit about what will happen going forward. So starting with order intake and revenue development. You can see in the graph here that we came from a period of strong growth back in 2018. And then halfway through 2019, growth started to come down, especially for our short-cycle businesses. That downturn was then further accelerated in 2020 with the outbreak of the pandemic. And then from the end of '20 onwards and throughout last year, we have now been in a recovery phase with strong growth, both from an organic point of view, but also in terms of acquisitions. And if we look on a 12-month rolling basis, both order intake and revenue levels are now well above 2018 levels. If we continue with gross contribution, and that's looking at the direct costs of cost of goods sold, you can see the trend line here. And there are 2 effects impacting the trend here. The first one is a negative mix effect from the relatively higher share of SMR revenue compared to SMM revenue. And that has a negative impact of about 1 percentage points compared to 2019. The second effect is the acquisition of DSI that we did in the third quarter last year. You can see the dilutive impact that that's had on contribution margin for the group. If we exclude these 2 effects, we've shown resilience in gross contribution. And as Stefan mentioned, building resilience starts with building a less-cyclical top line. And here, we worked really hard with increasing the aftermarket penetration and also growing our software business. We also have good pricing power to be able to mitigate the higher inflationary pressure that we're currently facing. As Stefan mentioned, there are lags within the SMR and SRP business areas. That's not visible here in the gross contribution graph, but rather when we come down to EBITDA level. If we then add fixed costs in cost of goods sold, we end up at gross margin. And here, we still have the negative mix effect from the higher SMR revenue impacting the trend line here, and the dilution from DSI from the third quarter of last year. On top of that, we also have a volume impact as some segments within the SMM business are still in a recovery phase. And we've been working hard with agility and efficiency and our geographical footprint throughout the last few years here. In the second quarter of 2019, we announced a savings initiative with structural savings of SEK 1.7 billion. Most of those were realized during 2020. We then, in the second quarter of 2020, announced a second savings initiatives, where we had structural savings of SEK 1.2 billion that we've now fully realized. If we continue down through the P&L and look at the SG&A development, you can see that we came from relatively high levels, above 25% back in 2018. That's gradually come down through the years. But what I want to highlight in particular is the development last year because it's -- you can see here in the graph that, in absolute terms, SG&A costs went up. But in relative terms, we managed to stay below 23%, and I think that evidences a controlled ramp-up. We will continue to work with efficiency, hydrographical footprint and agility. And this morning, we announced a new cost savings initiative with total costs of SEK 1.7 billion, and that will generate run rate savings of around SEK 610 million. And we will have delivered 90% of those by the fourth quarter of 2024. And that is an indicated FTE reduction of 580 FTEs. So if we bring all of this together and also add SMT, so looking at the total growth and the EBIT development, that's the blue lines in the graph here, you can see, as Stefan said, that we've clearly delivered on our trough margin target, even during the pandemic in 2020. If we then remove SMT and look at continued operations, so that's the bars and the orange line, you can see that we've had strong earnings growth in the last year of 27%, and our EBITDA margin has been around 21%. So in line with our new financial targets. If we then look at our new financial target in a bit more detail, what we've communicated is a through-cycle EBITDA margin range. It's not an absolute peak-to-trough margin target. And that means that there may be quarters where we will be above the range, and that should be interpreted as a margin that's not sustainable in the long run. There may also be quarters where we will fall out of range. And in these cases, we will take action and activate our contingency plans to get back in range. And that means long term, through cycle, we will have an EBITDA margin range of 20% to 22%. If we continue with the balance sheet and cash flow. And I think it's quite interesting to look at the graph on the left-hand side here, where you can see the cash conversion development. And you can see that in the period of 2018, where we had strong growth, you can see cash conversion was around 80% to 90%. Then as the downturn hit in 2019, cash conversion went up and peaked above 100% during the COVID downturn in 2020. Now we are in the recovery phase in a period with strong growth again, and you can see cash conversion coming down. And that's because we are investing in growth, but also a response to the supply chain and logistics challenges that we are currently facing. If you look at the net working capital development, you can see that we've been below or around 25% for most of the quarters here with a couple of exceptions. We've had sudden drops in the top line. We've had a gearing target of 0.5. And you can also see here that we've been well below this target for the historical period. Also in 2021, when we started our Shift to Growth journey and took on some more debt in our balance sheet. Looking at our new targets, the financial net debt over EBITDA, you can see that at the end of Q1, we ended up at a level of 0.6, which indicates that there's still good headroom for future growth given our target to remain below 1.5. I've also included here a table that shows a simulation of what Alleima's and Sandvik's balance sheet would have looked like if the spin would have taken place in Q1 this year. And you can see that Alleima would have had a cash position of SEK 1.5 billion. If we then add on the pension liability and capital-light leases, we would end up with a net debt of SEK 0.2 billion. And with an equity of SEK 13.8 billion, that's a gearing of 0.01. So a very strong balance sheet position for Alleima. You can also see the impact on the remainder of the Sandvik group, where gearing goes up from 0.31 to 0.38. So also there a good balance sheet position. I would also like to highlight that Alleima will have their Capital Markets Day in August. So I hope that you will all sign up and register for that to learn more about Alleima. I also want to take a few minutes to talk about capital allocation. And you can see here that during the years of 2016 to 2020, we focused on getting the balance sheet in shape for growth, and we allocated a fair bit of our capital to also reduce the debt level. Then we have had CapEx and the dividend, and then a smaller part of the capital allocated to acquisitions. If you look at 2021, you can see that -- you can clearly see here that our Shift to Growth journey began. And we got off to a really strong and accelerated start. And we will continue with our Shift to Growth journey, but not at the same accelerated speed that we had last year. And that's both from a balance sheet perspective, but also from an organizational perspective. But we need to make sure that we also integrate these acquired businesses in a good way and realize their business cases. We've guided CapEx to be below SEK 5 billion for the year, and we have left the dividend payout ratio target unchanged at 50%. So all in all, we have a balance sheet that provides a solid foundation for growth, both organic and inorganic. We have a solid cash flow generation. And with our financial target of a net debt to EBITDA below 1.5, that indicates that we still have good headroom for future growth. Then finally, shareholder rewards. We've had a targeted payout ratio of 50%. We came in at 40% for the years 2016 to 2021 as we didn't have a dividend during the pandemic. You can also see here that we've had very strong growth in adjusted earnings per share, which has increased from SEK 5.48 in 2016 to SEK 11.24 in 2021, and that's an increase of more than 100%. And on that positive note, I will invite Louise and Stefan back to stage, and it's time for Q&A.

Thank you, Stefan and Cecilia. I'm sure people are eager to ask some questions to you. And I will ask you to raise your hand. We have already Klas raising his hand. So we can come with a mic. And yes, let's start with Klas. And please do state your name and company name. It's a little bit dark down there, so I cannot see. Yes. Please, Klas.

Klas at Citi. So first on the 7% growth target. I was just wondering, I know it's not 2019 to 2025 for the group, but only for the divisions. But I still wanted to ask about the split between organic and M&A that used to be 50-50 before. I can -- if I go through all these slides, it looks like quite a big organic jump for SMR in upstream mining. But I was just curious to hear the split. And if that's correct, if it's SMR driving it.

No, I think you will see in the presentations that will come, that basically across the board, there's been an increase in the growth ambition. In SMR, yes, of course strong mining business right now. SRP as well. Also SMS has increased their target from 4% to 5%. And I shouldn't repeat everything that will come soon, but it's -- and SMF of course on top of that. So I would say it's increased ambitions across the board. But of course the strong mining cycle right now of course contributes.

Yes. But a split, Stefan, between sort of if it was SEK 2.5 billion more M&A before. Is that roughly what we should assume going forward? And then the uplift is more organic? That's my question, really.

I would say there is an uplift in both. We maintain that we think our balance sheet and cash flow generation, I should say, going forward, long term, is SEK 2 billion to SEK 2.5 billion of added revenues inorganically, and the rest should come from inorganic. In this period, of course, because of what Cecilia mentioned, as you know, 2021 was strong inorganically, so that contributes specifically in 2021. But it's -- of the overall uplift, it's more on the inorganic -- on the organic side.

Okay. My second and final one is just on the trough margin, Cecilia. When I eyeball the chart, it looks like pro forma, 16% goes to 18% ex SMT, and you haven't really changed that. I just want to see how you reason at the trough. Because obviously, you have 1.4% temporary dilution from M&A currently that maybe gradually goes away. So I'm just trying to understand like-for-like, if we have lifted the trough margin or if it's the same pro forma.

I think it's important to understand that -- and also, as you said, it's not a tough margin target that we are communicating. There may be times we might fall below the range, where we will take action to get back into range. So it's a slightly different target to the 16% trough target that we've had before. If you can add something, Stefan.

Totally -- sorry. Maybe I misunderstood. I know that 20% at the low end of the range is not the trough. But if I eyeball the chart, I'm just curious whether pro forma has changed, i.e., the 18% ex SMT.

No, I would say this. I mean, you can do the math. Just take SMT out. And I would say we have absolutely not lowered our ambition levels also when it comes to the trough. But it's not what we will measure ourselves against in the same way going forward.

Yes. We have a question from Daniela Costa.

It's Daniela from Goldman Sachs. I'll just ask 2 things. One is the follow-up on the margin. Understand sort of it's not peak to trough and it's a range, 20% to 22%. But given your structural improvements that you're expecting on manufacturing, which I think somewhere down the slide, say, 10-ish percent now to 20% in your ambition. Is it fair to say that within that range, you do see year by year, assuming you have the same growth conditions, an improvement. That's question one, and then I'll ask again.

I mean, if everything else stays the same, I think you should see a gradual improvement in margin as we grow, as we take out costs and so on. But at the same time, we know we will have -- continue to have an inorganic agenda. And typically, when M&A comes in, it is at a structurally lower margin than Sandvik. We happen to have word-leading margins, right? So M&A comes in at 13%, 14%, 15%, 16%, it has a dilutive impact. And then we work to improve that. But it means that at any given point in time, if you look at an EBITDA bridge, the way I would prefer it to look like is to always have contribution from organic growth, always a bit of dilution from inorganic. If we can do that consistently, it means that we're creating value by bringing in companies and improving them. But it also means that the margin improvements we get from some of our initiatives are always a little bit diluted also by M&A coming in. So that's why, yes, we stick to the range. But like-for-like, you should probably see a gradual improvement.

And just curious, I wanted to follow up on like why didn't you now set the return on your invested capital target, given you have a lot of M&A still in the pipeline and the adjusted -- the margin target is an adjusted EBIT target? But there's a lot of like cash and other things that could still fall below, especially in a highly acquisitive company.

We -- I don't have -- it's not that we looked at it and just said we should absolutely not have it. We benchmark other companies. There are some reports from people in here around what companies have as financial targets, what do investors want to see as financial targets and so on. And we concluded that we were quite happy in general with the ones we had, but we have done the tweaks that you have seen. So there was no specific thing that made us say we should absolutely not have a ROCE target more than -- we don't want to have too many, and these are the ones we have had, basically. So we continue with them.

Thank you. Yes. We have more questions over here. We can get the mic.

It's Joel Spungin from Berenberg. I was just wondering if I could start by asking about the cost savings plan that you've announced. And I was just wondering, in terms of the cost, the SEK 1.7 billion, I think the SEK 600 million of recurring cost savings. I mean, without wishing to be uncharitable. Is that sort of in line with the sort of return that you've got on previous cost-saving measures? And also, I think you say that there's about SEK 400 million noncash costs within that as well. So I was just wondering if you could elaborate what that is as well.

It's -- with your first question regarding whether this is in line with previous initiatives, I would say largely yes. In terms of the noncash items, that's related to some parts of the business that we will exit. And as part of that is a write-down that's of a noncash nature. But here, we won't go into the specifics, exactly what that is.

I would add also that in the past, we have had some of these programs where some of the adjustment was pure volume adjustments, then you typically have a much quicker return because the return is basically just a severance package. All of these things we have announced today is pure structure. It's site consolidations, it's sort of permanent efficiency improvements, which tends to be slightly longer than the average. But otherwise, as Cecilia said, we typically end up around 3 years, even if the mix of programs can be slightly different.

Andreas Koski.

Andreas Koski From BNP Paribas Exane. Two questions. First a follow-up on the nonrecurring items related to the cost savings program. Should we expect a new program, or should we not expect a new program before this has finished in 2024? Or can it be that you will announce more programs in 2023 and 2024 as well?

Well, someone said Sweden will never join NATO and it happened anyway. It's not our intention to come with this frequently. So I don't want to give a specific time line. We continuously always work on finding ways to improve, find efficiencies and make the cost structure more flexible. But the way you can -- we are indicating or we're telling you how this will play out in terms of the benefits, mainly '23, '24. I should also say that the intention is not to come with these things too often.

And then the second question is on the business areas' growth target. I have already looked at the slides, and I come to a revenue number of almost SEK 140 billion by 2025 for the group. What kind of business cycle development have you assumed to get to the SEK 140 billion?

We have not made assumptions on when the next downturn will come, so guessing where we will be in 2025. We basically work with CAGR numbers. And then it will go like that. So I guess that's the answer. We know economy will go up and it will go down. But on average, we are confident about the CAGR numbers, where we will be in 2020. That's why we have the group through cycle target as well because, yes, 2025 should not -- where the cycle is in 2025 should not be determining whether we feel we met the target or not.

And will the business area heads' KPIs be based on this 2025 target?

You're talking about bonus now?

Yes. And how they are measured.

We have, in general, 2 types of incentive programs. One is the short term, which is the yearly sort of performance. One which is long term, which is also actually based on a yearly measurement, but on earnings per share. So there is nothing saying where we should be in 2025 in that sense. But of course, the yearly targets are set based on the trajectory you need to be on to hit that.

Yes.

Over here. Anders Idborg, ABG. So on SMF in -- right here, in front.

Yes.

So you have a growth target there of above 10%, which gives us a pretty wide range of options. But then you also have the SEK 6 billion target. So I was just wondering, you've had a few of the most important pieces in there now for 2 quarters. So if you could update us on what you think the sort of the underlying growth is of those assets that now form SMF? And secondly, do you think there's another -- you need to add another big piece to get to your targets?

Can I suggest that we hold that until the end, if you haven't got it answered when Christophe presents? So I think he will go through that in a quite good way.

I'll keep that in mind.

Thank you, Anders. Yes, another question over there.

Yes. Olof Larshammar, Danske Bank in the dark in the back. I'm not sure if you see me. But one question regarding the gearing. And I think you said that the net debt to EBITDA -- or net debt to EBITDA at 1.5, but you could go above that level if transforming acquisitions. Could you please elaborate on what transforming acquisition could be? Will that be in the existing business areas or in new ones?

Yes. I would say it's more of an asterisk that it doesn't mean that we're going for transformative. It's just an asterisk saying, if something unique and once in a lifetime thing would come up, we want to be transparent with that, then we will do what we believe is right for Sandvik in the long run. And that could then lead us to exceed that level. So it's speculative what it would be. But what I will say, though, is I don't see it being outside of our existing core businesses. We have so many opportunities in the businesses we're in and very close adjacencies to them. So there is no reason, during the time that I can foresee, that we would have to broaden our business in a material way.

Yes, you have to wave a little bit so we can see you because it's really challenging.

Hi. It's Joel Spungin with Berenberg again. Stefan, I know you get asked this question a lot by investors, but just curious to hear your latest iteration of your answer. But with SMT, obviously, hopefully completing the spin-off of that this summer, where do you stand on the sort of broader question about the structure of Sandvik? And whether any thought has been given by the Board about separating the business into 2?

I think what I showed here in my presentation is I think Sandvik is a very strong platform. We have good leading positions. We have a strong culture. We have a decentralized operating model comprising of 21 divisions that can put their own flavor and touch on their strategies and what they want to invest and what M&A they want to do. There is nothing holding them back. I think it's a net positive to be part of the Sandvik Group. So we are focusing on delivering on these targets and on our strategy. And no focus on whether we should split up the group or not. There are probably a few bankers in here that would benefit from that. But other than that, we are quite happy with the group as it is.

Yes, we have one question here in the fourth row.

Yes. Gustaf Schwerin, Handelsbanken. Just a clarification. When you showed the value chain in underground mining, I think when you acquired DSI a few years back, you were quite [ clear that ] you were not going to get into the blasting part of the value chain. Of course since then, you bought the software part as well. Is that still the case? Just think about the title on that slide, that you're completing your presence in the whole value chain.

Yes. No, I think -- I don't want to comment on any specifics. I will just say, if it's in our value chain, really where we are, everything is on the table if we believe it's something that where we can also contribute and add value to. And there's always going to be things in your value chain where you simply should not get into, you should partner. So that's my general answer, and then I don't want to go into any specifics. But I think blasting is very much on the fringe of that comment.

All right. Do we have any more questions here? Take the opportunity. You have our CEO and CFO here now and ask questions for me tomorrow. No? Yes.

It's Mattias Holmberg from DNB. I think in conjunction with the Q4 results, you mentioned that we should expect a bit of a slower pace in terms of M&A compared to the very active -- high activity that we've seen in the past year. But so far this year, you seem to still be on a quite high activity level. So can you just elaborate a bit on how we should think about this? Is sort of what we've seen so far this year part of the agenda for the rest of the year as well? Or is it now we should expect to sort of wind down a bit?

No, but I'll stick to that comment. And okay, so far this year, we have done Schenck and then Peterson Tool, which is a smaller round tools company. Schenck was on my mind already when I made that comment, you never know what will happen. And Schenck Mining, when we define the strategy where we wanted to be in 2025, also inorganically, there were a number of areas we felt this, we want to be in these areas to strengthen the group. You have seen it in CAM, industrial metrology, in mine planning, in ground support, in round tools. And this was also something we were really keen on doing. And I would say it was the final piece in terms of achieving the strategic agenda we set out. Now there is still interesting areas on top of this, and we want to continue to reinforce the core business. But I would say we have done what we felt we really wanted, or in a way, "needed" to do. So really happy with that. But it also means that from here on, we can manage this in a way where we will look at the state of the economy, our balance sheet, our cash flow generation, and then continue with the inorganic journey at the pace we feel is appropriate, and continue to add where we want to add even more, such as, for example, in round tools.

I think also you can look at, last year, we acquired companies with a total enterprise value of SEK 29 billion. And if we look at where we were at the end of Q1 at a 0.6 financial net debt over EBITDA and looked at the headroom that's left to the threshold of 1.5, you can see that, that head -- there's good headroom, but that's less than what we spent last year on M&A.

Yes. I think we can check in with the operator if we have any questions on the conference call.

[Operator Instructions] And it seems currently, there are no questions from the phone lines.

Okay. No question. We have more Q&A, so that's good. We will actually then do a little bit of a detour to the agenda. And you will have the possibility to stretch your legs, take a coffee, visit the ladies room. And please be back in 10 past 2:00. But we will call you in. So thank you, and I think it's good. [Break]

So welcome back after this short break. We will now move on to the next speaker. And I will invite Henrik Ager, President of Sandvik Mining and Rock Solutions. Welcome.

Thanks, Louise. Good that you remember the name of the business area. Like Louise, I also think it's great to be here and be here in person. When we did this 18 months ago, we were talking into a camera. This is a lot more fun. I'm going to go in to give you a lot more detail about Sandvik Mining and Rock Solutions, or SMR as we normally refer to it. Before doing that, on the front page, what you see here is our 50-tonne battery electric truck, and 2 batteries, 2 chargers and a cooling tube. That is what you need to run one of these machines underground. So you don't need any fixed infrastructure or anything else, which allows you to essentially keep the same mine and go electric. But I'll get back to electric in a short while and in quite some more detail. If we take an overview of SMR. In 2021, we were a SEK 41 billion revenue company. That included 6 months of DSI revenue. So first quarter this year, we had revenue of SEK 12 billion, so quite a higher run rate than the SEK 41 billion. We have 9 divisions, so -- which I have on the bottom left. Ground support is DSI. So it's a new division within SMR. We are -- and with DSI, we've added to our aftermarket business. So last year, we were 37% equipment and 63% aftermarket, first quarter now, we are 30% equipment and 70% aftermarket. Almost all mining, so [ sort of ] is in tunneling, road railway tunnels and quarries for road construction, where we need to drill. When it comes to the commodity exposure, it's dominated by gold and followed by what we call the electrification minerals, so that's -- copper is the big one, zinc, nickel and cobalt and lithium, I'll get back to those in just a second. And then geographic I'll take you through how we see the underlying industry fundamentals or the growth drivers of our business. And I'll start with the growing middle class, which is a very strong driver for us. And what I mean by that is when a person goes for making $10 a day to making $100 or $200, he starts consuming a lot more consumer durables, mopeds, motorcycles, cars, refrigerators, et cetera. And that drives growth for minerals. They also need more power. Now when that growth happened in a country like India, which is taking up a significant share of that middle-class growth, you also get a higher demand for gold because that's a very common way of saving in India, is you invest in gold or in jewelry, actually. Then we have some important digital and sustainability shifts in our business, automation and more and more autonomous equipment, I'll come back to that; the increased focus on connecting the equipment and capturing data from it with digitalization; the rapid growth for electric equipment, and we'll spend some time on the dynamics of that. But I was just in South Africa at a big mining fair and there was enormous interest in electrification and battery electric equipment. And then a sustainability shift that we don't often talk about is the shift to underground. So there is a gradual shift -- these things don't happen fast, but more focus on creating underground mines and not surface mines because they have a smaller impact on the environment, at least a smaller impact that we can see. And then we have the high demand of electrification, minerals, nickel, copper, zinc, lithium. And you see the expected growth rates here on the bottom right. One thing that's important to notice or to note is that if you take the size of copper, it's about -- compared to cobalt, it's more than 600x bigger than cobalt in volume, in mining volume. So a small growth in copper means a lot. And it's around 200x bigger than lithium, just to give you a flavor. Now with these drivers as the context for us as well as our own position, we've outlined what we see as the most important strategic shifts for us in SMR. They're fully aligned with the group's strategic shifts, as Stefan presented, but a little bit more specific to what we are driving. So if I take them one by one, the first one is the focus on the high or the fast-growing upstream hard rock. And what I mean about upstream is from mine planning, drill and blast, ground support, load and haul. That's the value chain we focus on. After that, it goes to the first crusher. And that's where Anders takes over. You'll hear from Anders in just a bit. We target growth in this upstream value chain, primarily in gold and electrification because they are the fastest-growing minerals. So with fast growth, comes higher commodity prices. Our customers make more money, and they buy more equipment. Second strategic focus area for us on this strategic shift is to shape the sustainable underground mine in the future. In underground, we have a very strong position along the value chain. And we are in a position to shape how that evolves through driving and being leaders in digitalization, electrification and automation. We feel we have very good trajectory in that and good momentum, and I'll show you some examples of that. In surface mining, it's a little bit different. We're only in surface drilling in the surface mining value chain. So here, our focus is to take a leading position. We have a great offering across rotary, DTH and top hammer. Those are the 3 ways you drill on surface. And we have a great offering, but we have work to do to be a leader, market share wise. We've taken some great steps, and I'll show you that in a second. Then we want to be a customer first performance partner. So we want to take -- put skin in the game and take a bit of performance risk of our equipment and our service and support so that when our equipment runs well, we get paid a little bit more. When it doesn't run well, we get paid less. And we take a little bit of that operational risk from our customers. That's something that they request from us and that we want to do. To be able to support that, we need the best service and support, both basic, the right spare parts, the right technical expertise on site; and advanced services, to connect the equipment, collect the data, analyze it, provide preemptive maintenance to the equipment and treat the equipment as the individuals they are. They're made by different people, it's operated by different people. It's maintained by different people. So each drill rig or loader becomes an individual. They're not all the same, and they should be treated as such. Then last but not least, building a high-performing and agile organization, keep our decentralized structure with our 9 divisions, let them do -- define their own strategies, align with this but they have to be specific to them, and drive that and move as much of the accountability and decision-making to them as possible. So what I'll do now is give you a few examples of what we have achieved recently and then go into more of how we see the path to 2025 in terms of growth and then a little bit about our vision of the sustainable underground mine of the future. But we start with a few examples. So on the digital shift side, we capture the biggest automation order ever in the industry, at least underground from CODELCO, about 250 million. We acquired Deswik, and I'll talk more about Deswik in a second, which gave us a leading position in mine planning. And then Newtrax. Some of you would remember, we acquired a dial and equipment connectivity company back in 2019 called Newtrax. They took a single order for SEK 155 million for a collision avoidance system from Sibanye-Stillwater, so good traction there. On the sustainability side, I'll come back to electric, but we do have the biggest underground battery electric fleet of anybody. We've launched the biggest underground battery electric truck, and I'll show you that. But also on the surface drilling side, we have launched a big top hammer drill that can drill with 50% of the fuel of a normal DTH rig. So you say, you don't eliminate the carbon footprint, but you cut it in half by going from 1 drill to the other. Of course, you also save a lot of money, so it makes sense for multiple reasons. And then we've done well on reducing our own greenhouse gas emissions and reduced that by 25% to 30%. The shift to growth, we got DSI, Deswik and Tricon, our 3 latest acquisitions here on the page. With Deswik and DSI, we then capture that full value chain that Stefan showed. Deswik will remain OEM agnostic. As a mine planning tool, it has to be OEM agnostic. But we can, of course, make sure that they have all the benefits of our equipment in that platform. And then last but not least, the shift to growth in surface drilling. And for our boom drills from '20 to '21, we saw more than 60% growth in order intake. So here, we're really taking market share with surface drilling, and we're starting to get there with our rotary drills as well. What we'll do now is going to battery electric. I'll show you 2 video clips. The first one is our 18-tonne loader, that has some sound to it with our customers speaking to it. [Presentation]

Pretty cool equipment. With this -- he said, better productivity, let me give you some numbers because that's more fun. The diesel equivalent does the cycle. So when you load tram as we say in mining, which means drive, so you load it, drive uphill, unload and drive back. So the diesel will do that in 9 minutes in this particular mine. With this loader, we did it in 4.5. So cut the cycle time in half. Actually, they did it in just over 4. So more -- took out more than half. So it's a much more productive machine. Now we also launched just recently our 65-tonne truck. So we'll see a video clip. And what we did -- so this is the largest truck. And we sell a 63-tonne diesel truck. And that's our biggest selling. So almost half of the revenue for trucks, we get from that 63-tonne truck. Here's the 65-tonne equivalent for battery electric. We took the best from our 50-tonne battery truck, we took the best from the 63-tonne diesel and put it in this truck. We've also upgraded the batteries, so it's easier to service, and it has more than 30% more kilowatt hours in the battery. So quite proud of that. It's now on its way to be on show in South Africa, going to Australia and then going in the field for some extensive testing. What you don't see in these pictures is that this equipment gets banged around underground. So that's the challenge. You have to make it rugged, must withstand operators driving into the wall and a bunch of other things. Now some more detail on what we're doing on electric. So today, we have our mechanical cutting equipment. It's 100% electrified more focused on coal, but we're expanding it to do more in potash platinum and gold. And then we, as I mentioned, have the high -- the biggest fleet of battery electric vehicles. By 2025, we will have a very strong offering in load and haul. So you can see the loaders and truck sizes here. And then we'll also have underground drills battery electric for every application. So that's tunnel development, production drilling and bolting or ground support. And then by 2030, we expect more than half of our sales for our underground hard rock to be electrified. A question we often get is around what happens to the aftermarket with electric, what does that look like? So we did an analysis comparing then the diesel to the battery electric. Now with the battery electric, there's also the battery part. So we did the analysis of battery as a service. So we provide the battery, but our customers pay it as a service. So that analysis looks like this. So with the diesel powered, it's about a 50/50 split over the lifetime of the equipment, between equipment, CapEx and aftermarket. With a BEV, the aftermarket parts, so the equipment part is a little bit bigger and the aftermarket part is a lot bigger. So we're nearly doubling the aftermarket potential. And the addressable market for us goes up by 60%. So it goes from then 100 if you index it to 160. Now the reason our customers then buy into this is because with those higher speeds, so it loads faster, it drives faster, and it carries more tonnes. So that 18-tonne loader you see there on the screen is the same size as a regular 14-tonne loader, you get 4 extra tonnes every tonne. So you get more tonnes out of the mine or you can run the mine with less equipment. If we then look at a few other successes that we had, I mentioned CODELCO, and El Teniente is a mine where we received the SEK 250 million automation order plus SEK 150 million of equipment orders in quarter 4. Now we recently, last week actually, received another automation order for SEK 87 million. We also, last week had a new BEV fleet order for SEK 140 million for 11 pieces of equipment. And then I mentioned the Newtrax order of SEK 155 million, and this is for collision avoidance to allow for equipment and people being together and the equipment automatically stopping should it come up on a person or another vehicle. Our surface boom drills, the growth of more than 60%, and that's the focus. So boom drills, that is DTH and top hammer drills. So with this as the backdrop, I thought I'd show you how we see the outlook to 2025, so starting base year 2019 and then the growth that we see. So obviously, we see growth in our current business. So the business that we had in 2019, then adding in core mining but adding to our value chain exposure. So DSI is a big part of that middle box. And then where we see the fastest growth is in battery electric and digital. So there we see growth rates of more than 40% per year. But overall, we see growth of 10% per year over this time period, so going from SEK 37 billion to SEK 67 billion in revenue. So with that, I'll then switch over and give you a little bit of a flavor of how we see the sustainable underground mine of the future, looking at these 3 major areas: electrification; automation; and data and analytics or digitalization. So if we start with electrification, obviously, you have the 100% electric equipment. As I mentioned, they are more productive, they can be faster, load more. They don't emit, obviously, any diesel particulates so -- and a lot less heat. So you can survive with -- sometimes you can reduce ventilation needs by 30%. That's a big cost saver especially for expansion projects in greenfield mines. If we go to automation, it's obviously the autonomous equipment. We also see that supported by drones, scanning the different areas of the mine. And then having that collision avoidance system on board to allow you to mix the fleet or mix equipment with people underground. What we're developing with our next-generation automation system is also AI on board on the equipment, so artificial intelligence on board of the equipment. So the equipment can plan its own route. Now it's all predetermined, the route that the machine will take. And sometimes there's congestion in the mine. There's too much equipment or people in any one place. So with that dynamic path planning, you can get a lot better productivity because the equipment can then take a different route, avoid the congestion and keep moving. And then finally, on the data and analytics, if you start at the bottom, obviously, all the equipment is connected. On the left, you see actually then measuring the rock conditions as we're drilling, as we're moving the rock to understand the rock weight, then you can optimize how you charge and blast and get more productivity as you develop the tunnel or when you blast for production. Then, of course, you need a digital control room and an AI center or engine that will run in the cloud. So those are the different components that we see in a sustainable underground mine in the future. So to sum it up, we see strong market fundamentals especially in the space where we're exposed. So overall mining production is looking to grow about 2% per year, but our exposure, we see growth of 3% to 4% in mining production. So we're exposed to the faster-growing side of mining. We are making the shift, so we have good momentum in the direction that we want to go, with the commodity exposure that we have, what we're doing in surface drilling, what we're achieving in digitalization, electrification and automation. So we see we are in a position to capture leadership in surface drilling, as well as be a shaper of the sustainable underground mine of the future. And that was my final slide. So with that, I'd like to invite a few easy questions.

No easy questions, Henrik. Okay. Klas is first again.

So Klas, Citi. So first, Henrik, in load and haul you said 60% more addressable markets were mainly battery as a service and a bit higher ASP. But you have drill rigs in the mix as well and drill rigs, they don't move as much, and they are also more electric already. So if you would blend the 2, where would that take the addressable market for SMR as a whole?

Good question. Well, they are about half and half. So probably then the addressable market goes up by maybe 30%, 35%. But now I'm doing the math in my head.

Okay. But it's true that the TAM is lower.

Yes, yes, yes. I mean the drivetrain in an underground drill is a small piece of the equipment. It's not that important. You drill on electricity already.

Exactly. My second one is on surface drilling. And here, last time, you said 15% market share to 30% is the ambition. And the last conference call was one of the first times where Stefan said, we are taking share now in surface drilling. That creates a lot of debate on who you're taking from. Is this for a [ Carboloy ]? Is it Epiroc? That's the first one in the same question. The follow-up is really, what are we talking about in terms of growth potential? Obviously, numbers of SEK 40 billion addressable market. If you take -- if you double your market share, you get 1% to 2% additional growth, just if you could give some numbers on that.

Yes, well, first, in terms of who we're taking market share from. I'll -- let me answer it in a different way. Our fastest-growing product is DTH for large-scale surface mining. There's been 1 supplier of rigs into that market, and that's Epiroc with their D65. So I think that probably answers that question. We're hopefully taking market share from other people as well. Then as for the numbers, yes, I agree with you that those are the sizes that we are looking at. Now the landscape changes around a little bit, but you're roughly right in your assessment.

Yes, we have a question here.

It's Daniela from Goldman Sachs. Just one question actually, probably an easy you one. You talked about the 3% to 4%, which is production growth. Can you elaborate on your view regarding mine expansion? We hear a lot about shortages of copper, and what's your expectation on sort of new greenfield?

Yes, greenfield usually accounts for a fairly small share of the growth in our sales. So most of it is replacement, then there is a large part that's brownfield, and then there's a little part that's greenfield. I don't see that changing. Well, with current commodity prices, our customers make a lot of money and they will keep investing. Should the commodity prices change, well, that will change as well. But I don't think the share of greenfield, brownfield and kind of sustaining CapEx is going to dramatically change in this environment, but we've been in this environment for a while now with high commodity prices. And yes, the brownfield and greenfield does go up a bit.

Mattias Holmberg, DNB. Could you please up us with how big a share of your perhaps backlog or current sales that is battery electric today? And also some thoughts on perhaps how long the penetration will take to reach sort of some significance in the market.

Yes, so last year, year-to-date, we were at -- so now I'm focusing on the load and haul division. It's a little less in underground drilling than in load and haul, but last year, year-to-date, it was 1.5% of our order intake. This year, it's 3%. So still low numbers, it's doubling. So it's rapidly growing. I think, give it a couple of years. So 2 to 3, this will be a big part of pretty much every major tender that we have. Some customers decide to go full on early in order of fleet of battery electric, like the order that I showed, and there are a few other examples. Most go and test the machine, so they want a loader, they want a truck, they want to try it, they'd rather try it for maybe a year and build the capabilities. Understand, this is very different to maintain and service an electric drivetrain and a battery, so we have to build new skills. We have a big labor force out there in mining that has serviced diesel equipment for 100 years. So we need to build a lot of new skills. So that was a long way of saying probably in the 2- to 4-year time frame, I'm guessing where it really starts to impact from a volume point of view.

It's Joel Spungin from Berenberg. I was just wondering if I could ask about the load and haul platform that you have. Presumably, it's based on the architecture you acquired with Artisan. Is there a significant advantage to having a platform that has always been based on battery as opposed to sort of retrofitting into an existing load and haul truck? I'm just wondering whether the same rules apply as maybe doing the passenger car market.

Well, I don't know the passenger car market that well, but yes, we see a significant advantage. First of all, yes, you're right, we're basing it on the Artisan platform that we acquired in 2019. So that's correct. And when you design the equipment around this new electric drivetrain and battery, there are a couple of things that you can do. One, you can make the equipment smaller for the same capacity. So hence, the 18-tonne loaders is the same size as a 14-tonne diesel loader because you can take things away and optimize in a different way. Second, you get a lot more efficiency. So you use your power a lot better. With the diesel engine, it's always running. So you've got hydraulics, pumps and other things that are just running off that diesel engine. It doesn't matter. You run electric, it does matter. So if you just retrofit, you've got to keep those things running, and it eats a lot of power. And then last, you get that power when you optimize around -- in your drivetrain, you get that power. So you're faster, you can load faster, you can drive faster. So I don't think -- in the short term, there are some benefits to retrofitting because you have more of the same parts. It's a little bit easier for the technicians because there are fewer things that change. But in the medium term, I'm 100% convinced it has to be designed around electric. That's how you get a productive machine. That's how you get something that's better than diesel. We don't want a me too, we want something that's better than diesel, just like Tesla wants a car that's better than petrol.

And then maybe just a slightly different question. As the volumes of electric vehicles sort of ramp up in your factory, sort of, you kind of touched on it, but what are the major challenges from sort of a production perspective of moving from producing IC trucks to electric trucks? And how does it impact the supply chain?

Well, where should I start? Lots of challenges. First, we're building very few low volume of units, so you don't get that repetition and it's hard to drive efficiency. We're changing technology because we're learning faster, which we do with new technology compared to diesel is more stable. So you've got both of those. So I think we'll see a rapid cost decline for battery electric as we grow the volumes, get repetition and learn and also then work cost of the product.

I think we have 2 raised hands. Yes?

Vlad Sergievskii from Bank of America. Easy questions on the cycle, if I may. First of all, your revenue target for 2025, does it assume any slowdown in the mining cycle between now and then? Because obviously, we are already quite high up out there, we have been growing for a few years, equipment demand probably back to previous peak cycle already. Within that, another question. Obviously, electrification is a big driver for this upcoming mining cycle. But that's about 30%, maybe a little more of equipment demand what else is driving this mining cycle? What are the key drivers for the remaining 70% of the equipment?

Well, maybe I start with your last question. I mean it's really the general growth in GDP. And then you -- I mean, China's still investing quite a lot in infrastructure, you've got other economies that invest in infrastructure like India, like Indonesia that drive the commodity demand growth -- the growth in commodity demand. And then I mentioned the growing middle class, and the growing middle class, which drives infrastructure investments, but it also drives then the consumer durables and so on. Quite a stable trend to rely on also. We have to really mess up in the world for that not to continue. Then in terms of the outlook to 2025, no, we have not built in a commodity crash in that scenario. So it's assuming the 3% to 4% growth in production. When you have that, you tend to have high commodity prices. They don't have to be at $2,000 an ounce for gold, but they -- probably between $1,500 and $1,800, that's a very healthy range, at least with the current mining assets that are operating. Then our customers will generate the money required to invest in these projects. So that's what we have assumed, that 3% to 4% and how that then carries into investments in both new mines and into equipment.

That's great. And if I may, another question more long term one, beyond 2025, on one of your key commodities, which is gold. In the past few years, we have seen a number of examples when demand for certain commodities is effectively restrained by environmental agenda. We can call it -- call, oil and gas. Do you think long-term gold could be a victim of that? Because, of course, the CO2 footprint of operation is one of the highest across the mining space on one hand. And on the other hand, well, we'll only use gold for jewelry.

Your last comment is almost, right? We use goal for a lot of other things like electronics and so on. But you're right that jewelry is the primary driver, then you have financial investment as well in Central Bank's buying gold. But I don't see that happening. I do see the gold companies being very active on their ESG agenda and driving their net zero targets. And we see that translating into action where they want the electric equipment. Like we've got 4 battery electric trucks with Barrick in Nevada and there are lots of other gold mines that are going hard for battery electric to electrify and reduce that carbon footprint. But I don't see -- well, I don't see that yet as a threat to gold. Now having said all of that, I think gold is the hardest commodity to predict because such a big part is both jewelry and financial investments. And with financial investments, if the mood swings, demand drops a lot and then prices come down a lot and those swings go faster. I find it easier to predict copper, zinc, nickel, iron ore and coal.

Do we have more questions?

It's Anders, ABG. So the 60% higher addressable market, that was interesting. Could you help us with the profitability as well? Because slightly lower sales of spare parts, which we know are very profitable. And then battery as a service, which we don't know at all very well, it's a completely different business model. So how should we think about profitability on that higher addressable market?

Yes. I join you in the club of we don't know a lot yet, which is correct. And really, we're innovating at the moment, so it's really hard to predict. But obviously, we have the ambition to get to the same margin level as we currently have. We have a plan to get there, to the same profitability of that bigger pie that we're going after. But we're going to do -- have to do a lot of work, number one. Number two, we also have to prove to our customers that, a, the equipment is worth it, so it's worth investing in that equipment and you get that productivity benefit because then they will be prepared to pay for it; and second, we've got to be one of very few to make the best equipment to be able to do that. There are lots of providers of mining equipment that is far lower quality, far lower productivity, but a lot cheaper than ours, and our customers will still -- are still buying from us. So as long as we can achieve that, the same -- which I think we can, we can achieve the same margin level as we do for traditional diesel.

Just a very short follow-up. How big part of your customers choose the battery-as-a-service option when they're buying electric?

Yes, currently, quite a few, actually. So we see -- and when we look in the near term, we see like 3/4 of our customers will take the battery as a service. It's also a technology -- a safer technology bet, right, because then the owners of fixing the battery making sure it works is on us. So we see that going down over time. We're guessing to maybe 50% or 60% of total.

All right. Shall we take a final question, if there's any? There's not. So now it's actually time for the real break where you are allowed to take the cinnamon buns and smoothie. But fill up with some coffee, and do take the opportunity. I know you've been doing that already, but we actually have our Head of Strategy from our different BAs here at the screens. They can also give you more color on how we are creating value, our recent acquisitions and innovations. So please do. And we meet back at 10 past 3. [Break]

Welcome back after the break. And also a warm welcome from my side, Nadine Crauwels, President of Sandvik Machining Solutions to this session on Sandvik Manufacturing and Machining Solutions. I will do this session together with Christophe Sut, so he will join me soon on stage. Starting with a bit on the facts on Sandvik Manufacturing and Machining Solutions. We are a business area with around almost SEK 37 billion in 2021 on revenues and with EBITA of 23.1 percentage. Here, we must say that both of the business area segments are, as all parts in Sandvik, built in a decentralized manner. So we have in total 8 divisions. Within Sandvik Machining Solutions, we have 5 divisions. Each of them is a really strong brand and really a leading global in their own territory. Meaning we have 3 multi-brand approaches in the premium side. We have one mid-market brand. And then the fifth division within Sandvik Machining Solutions takes care of logistics as well as the powder supply for the other divisions. This really makes us, as we previously heard, as well vertical integrated. Sandvik Manufacturing Solutions is built slightly different. They are built more from adjacent manufacturing processes and technologies. So they have additive manufacturing, design and planning automation as well as industrial metrology. When we look to our product offering, you see very clearly that it is still majority-wise based on hardware, meaning half of it is coming from inserts, then we have round tools and holding tools. But we are proud to say that also the software part that is in our business area segment is growing and counts today in 2021 for 3% of the total. In the 5% others, you can see here, it's the powder from additive, for instance, and also the equipment from the metrology that is counted in that subpart. When we look to our business, then we can say that geography-wise, we have half of our business or slightly above in Europe, and North America and Asia are taking each kind of equal part of the remainder size. When we look to the segments, where we are playing most and that is for us the most impactful and also the most powerful is the general engineering, counting also for half of the business, followed by automotive and then aerospace and other. Needless to say, with the pandemic in between for us at Sandvik Machining Solutions, aerospace was on the previous Capital Market Day version a higher share because that, of course, is still the area that is most under recovery. So the story that we are going to tell you today, so together with 2 business area segments, is a story of growth, is a story about expanding our offer above and beyond, above what we can do as 2 separate business area segments and also beyond the core businesses and beyond hardware, creating new software solutions, creating new business models. This is also the explanations we are going to hear, listening first to the deep dives of the 2 business areas segments separately. Those growth opportunities in each of them are quite different, so we have truly different growth opportunities in all our leading positions. But when we put our 2 areas together, we create truly a unique market position. And that unique market position is easy to visualize with this customer value chain that you see on the picture. We see that on the blue side, Sandvik Machining Solutions is very strong and has is historically foothold in the machining part, where the manufacturing processes happen. But we know that machining is not only about inserts and tools and even more and more about the know-how, the data that is available and can be used in efficient ways. That availability of data and usage goes and gives us opportunities left in the value chain as offers and ability to create new business models. When we look to Sandvik Manufacturing Solutions, they have an alternative to machining, and that is with additive in the manufacturing middle space. But besides the additive, they are very strong in the outbound side of the value chain, although very much on the left when we talk about design and planning and also very much on the outer right when it is about verification. So we are, in total, having a market potential of SEK 375 billion, and we will talk today more around in the later part of our joint offer and how we are building a platform to accelerate our common goals there as well. But before going there in this common part, I would like to introduce and invite Christophe Sut on stage as he will take you through the Sandvik Manufacturing Solutions part first.

Thank you, Nadine. Good. So to start with, let me give you some glimpse on what is Sandvik Manufacturing Solutions with a couple of numbers. During 2021, we reached a run rate of SEK 3.1 million of revenue, which was, as you noticed, completed -- which was, as you noticed, came from a big chunk of acquisition we acquired for SEK 2 million of revenue in sales. We have an EBITA of 10.4%, which is actually a mix of 2 things. We have in our portfolio companies that are established and that are growing and scaling very nicely and a few start-up projects that are here to build the future. And we have 1,900 employees. Our organization, as Nadine mentioned, is built around 3 divisions. One is design and planning automation, industrial metrology and additive manufacturing. And I will get back a little bit later on those to make you understand what they are doing. Then what you can notice when it comes to our footprint, we are very heavy towards North America and mainly due by the assets we have acquired that have a very strong footprint on the North American market. Then in terms of customer segment, general engineering is extremely heavy for SMS, which means that we have a very broad reach when it comes to type of customer we address and not a dependency to a single sector. Then finally, a number that is important and interesting is, after acquisition, we have a portfolio and a mix in terms of product that brings us to 45% of our sales being software sales, 7% being services that are usually the enabler you might need in certain scenario to implement the software, and then around 48% is hardware. And hardware, as Nadine mentioned, is 2 things. It's additive powder that -- where we have a leading position, and then it is some metrology hardware that, in many cases, is an enabler for our software suite. Going to the different divisions. As I mentioned before, we have 3 divisions. The first one, design, planning and automation is going from CAD to automation tool prior to the manufacturing regular size. Additive manufacturing is driven mainly by our powder business today, which is a new alternative, you could say, to subtractive manufacturing and a complementary alternative to subtractive manufacturing that is driven and developing through the drivers of sustainable manufacturing. And then finally, industrial metrology, where we have both a software and hardware play,and where we are trying here to move towards in-line metrology, meaning moving the metrology closer to the manufacturing workshop. Looking at the acquisition we had during 2021, we had 4 significant acquisitions acting in different spaces, 2 for the DPA division and 2 for the industrial metrology. Mastercam and Cambrio that joined us during October last year are 2 brands or 2 companies actually that are acting towards the cam type of software. So if you look at Mastercam, which is the brand that is used for CNC software when it comes to their cam solution plus GibbsCAM that is the brand from Cambrio towards that segment, we have a leading position in number of seats on the market and the #3 position when it comes to the revenue. So it gave us a very strong footprint within that market. Then when we look at the metrology acquisition, we got with DWFritz automation capability but also the opportunity to move metrology to the manufacturing line. And that's what it did brought us. And DWFritz is a sizable company, $78 million size. And then finally, DCS is a software component that is built to provide a solution when it comes to quality verification and tolerances verifications for the metrology components. And that's a smaller company, very niche but complementary to other software we have like Metrologic. So those are the 4 assets we acquired during 2021 that gave us a strong position in those markets. I would like now to walk you through the dynamics we see on the market. And starting by the change of customer behavior, I mean, as it was mentioned a little bit earlier today and in some of the booths, I mean we can see that we have an aging population when it comes to manufacturing. And it has a significant impact in terms of behavior. And this is the following. I mean we have a lot of people that have been extremely experienced and know how to run the machine. And in many cases, those people have been able to just stand by the machine, listen to the noise it produce and know the outcome they will get. That is going away, and therefore, there is a need to automate those things to ensure repetitivity of those things. And that's where -- that's one of the driver that is very important to us because it means that people are looking for solutions that will replace experience, and it's automation. Then the second element is the nature of manufacturing and design itself. Engineers have evolved. They develop more and more complex solutions. And in the same time, the tool you use to produce and the machine you use to produce are more and more complex. For example, we can see a very strong expansion of multi-axis machining, so 5, 6 axes. And as you go to more complex machine, you need to have a way to prepare the cord you will use to produce. So those are examples that are changing the environment. And all those things that get supported by a shift towards digitization. So on the one hand, you need help because things may get more complicated to produce, you are losing competence. And in the same time, you get a world that becomes more digital and people use to digitization. And those factors become very favorable to the business we are in. Looking at the impact it has on the growth, you can see that there are 3 markets where we are mainly acting on, which is computer-aided manufacturing, where DPA is acting as a division; additive and industrial metrology. And the CAGR for those businesses is between 7% and 21% for the coming period, which means that we have an opportunity that is above GDP and above the average in the industry. Then what you can also see is that the addressable market we are approaching for all those markets is sizable. And by doing the first acquisition we have made, we are starting to have a serviceable market that is significant, but we are not at the end of the world. There is still work to be done. The way we do the shift to growth is, first of all, we are part of the industry, meaning that we have a lot of connection historically because of our initial background, because of our connection through the tool we produce. And that's something that is key in the way we operate. I mean we capitalize also on the knowledge we have both in terms of players but also in terms of technology and how do you implement, how do you produce and how do you capture the outcome. Then what we are aiming at is really at closing the loop of manufacturing and having a software offering that is agnostic, that will function with anything you find on the market and that will enable improvement of productivity. And the way we are doing it is by meeting customers, building cases, and I will cover that a little bit later and give you some example, and shaping new market based on real cases. Looking at workshop, what you can see here is that we are acting from component design to the verification. And we have mapped the workshop to be able to identify what are the different steps that needs to happen in order to be able to produce a component. Looking at those different steps, one of the main challenges you have is that today, those steps are taken as independent and silos, meaning that very seldom you will share data from one step to the other, which means waste, complexity to move on and to move to the next step but also loss of productivity. A very simple example, you might decide the type of tool you want to produce at an early stage. But then you might not know if you have it in stock or not. And then you will have to go back, maybe order it or maybe look for another alternative. So this is very practical challenge that people face on a daily basis during their manufacturing process. What we have done over the last 18 months is being able to line up assets that allow us to be a player in the different steps of the manufacturing, which means that now we are starting to get the possibility to have a play because we understand and we have the capability to offer a solution in the different steps of the manufacturing. So we are working and moving forward. We have started during 2021 to really build a portfolio of company, making sure that we have the assets that enable to have a play in that market. And that's why companies like Mastercam, like GibbsCAM, Sigmanest and others have come into play and have joined us within Sandvik. From that, all those assets are very interesting assets, and we have started to continue their own case and their own growth. I mean, obviously, those are companies that have been here for long but that still have growth opportunity with a market that is extremely dynamic. So there is a case on its own to ensure the profitability and the growth of those companies. On top of that, we are starting to create values and synergies. And the way we are doing it is we are looking at the customer cases, how we can create value beyond the individual value that the company can bring and we transform it into the market. I will cover a few examples to try to help you to understand a little bit what we are talking about. So this is an example of synergies that has been created after acquisition. What you can see on the movie -- and now the timing was wrong because the component disappear, here it is. This is a rotor of an electrical motor. And as you can see on that movie, this component is extremely complex. It's a lot of different shape on it. And each of those components has to be absolutely perfect in order to reach the right level of efficiency. So the challenge that the manufacturers are facing is how can I be able to measure every single component at the speed of manufacturing. I don't want to send one component to a lab that's going to check it and come back a couple of hours later that tell me it was wrong. I want to be in line and to be able to verify the component and say this component was good. And it has to go at least at the same speed as you will manufacture it because another one will come and another one will come. What we have done here with the capability of DWFritz and the metrology software we have before, we have pulled together a solution that enable both the scanning of the component at the appropriate speed, but also because of the capability of our software, we can manage the cloud of point and check that the component is good. And that's the way we believe we will create value. We identify an area where there is a problem that is part of the big loop that I showed you before. We'll make it happen for our customer to make sure that we can scale it to other solution. So I think the first customer we met was somewhere in October, November. And 2 weeks ago, in Control Show in Germany, we were presenting 3 or 4 machines integrated with that software and starting to capture the first opportunity. So very exciting. Another example of added value we can create is between our CAM software and our tools. As you might know, our tools are quite intelligent. It's a lot of data related to tools, but it's also a very broad range of tools. So the main challenge you will get when you launch a manufacturing is to make sure that you pick the right tools and that you get the right data associated to the tool to have the right outcome. So what we have done in that scenario for our centralized tool, we make sure that the data are available within the Mastercam software which allow people to really gain in efficiency because they know that the data they will get are correct and right but also allowed to capture a better productivity in the workshop because the outcome of it will be in line with what you expect because it is a proven process. So those are 2 examples that are practical example that we have been able to realize because we own the asset and because we have an understanding of the technology and what can be reached. When it comes to financial target and what we are aiming at, we are SEK 3 billion today, and we are aiming at moving at SEK 6 billion by 2025, which is double components. One is organic growth, where we will travel in the middle of the range that you saw before in terms of the CAGR of the different markets. And then the remaining piece will be bolt-on acquisition. Then it should -- it will bring us to a level of EBITA margin, around 20%, knowing that a lot of the components we have are software that are highly scalable as you grow the revenue. Finally, as we continue to grow, we will shift our mix towards a higher weight of software since we have a target to have by 2025 60% of our revenue coming from software solutions. So to conclude, we believe that we are operating in markets that have a very strong market growth. I mean you saw it before, having the lowest market is still having a 7% CAGR for the coming years, up to double-digit 20%. We believe in being agnostic. And what we mean by that is, for sure, we want the Sandvik product to work better together than any other solution, but we will not be closed. I mean we will also work and we work from time to time with competitive solution just because this is the environment we live in. People will not just drop everything they do because we come in, but they will start to adopt our solution. And step by step and one after the other, they will capture it. Then we have a position with very strong brands. I would say that we can measure every day the asset of the company we have acquired and, I will say, the stickiness of the solution they have built, which is very important. I mean you really want this process to work. If you run a manufacturing workshop, you don't want any failure. You want the people that operate are relabeled and that we have really acquired. And the way we will create and accelerate the growth is by shaping market. I mean we take case, we have a vision, and the vision is to connect different parts of the workshop that you have seen in the loop. We identify -- and I will get back a bit to that later when we conclude with Nadine. We identify the different building blocks. And then we make them work. And we connect them one after the other, delivering the customer to -- the value to the customer but also creating revenue on the journey. And all in all, it will bring us to a revenue of SEK 6 billion. That was for SMS. I will hand over to Nadine again for the SMS part.

Thank you, Christophe.

I'll take my glass of water.

I have brought my own. Yes, thank you. Good. This is going to stretch your attention levels as we are going to do another 20 minutes in a row, and we are going to dive into Sandvik Machining Solutions. As you've seen the facts around Sandvik Manufacturing and Machining Solutions in the beginning, I can directly dive more into our strategic direction, which is a shift to growth. As you can see here, it is very much related to what we previously said, so shift to growth above and beyond. So we have the ambition to grow above the market levels and also beyond our core business and relate that as well to this expanded offer that we have been talking about and also Christophe talked about. When we talk around shift to growth, we have 3 building blocks. And of course, the first one, the big building block on the top is our extensive brand portfolio. We have these leading brands, global brands who are carrying very, very profitable and good growing core business. But also, we are adding, as we speak, other brands to our portfolio that are also including like with CGTech also software solutions to advance our total machining know-how related to our core business. Here, this brand portfolio is so built together that we have premium and mid-market, so we can also maximize our opportunities to take market share in the overall market. The second building block is the Sandvik Shift, and one area in the Sandvik Shift is related, as we heard earlier, on growth. But the second block I would like to highlight here as well is about agile through the cycle. Within Sandvik Machining Solutions, we are always striving to have the highest level of operational excellence. That means that we are revisiting and revising our operations as well as our setup in our sales organizations continuously to be on top of the best performance for the future. Besides those 2 elements, we have also 4 enablers that we take with us, and that is the digital shift, sustainability shift, a high focus on customer innovation and also securing we have a great place to work. Those 2 blocks is driving us to the shift of -- to growth. But during last year, we saw and we knew as well that a strategy in successful execution is needed to be really focused. So last year, we decided to be more clear, to be more crisp in our growth plans, and we went for 6 identified growth areas. Before I dive into those 6, I would like to start with you together on looking into the market and where the market is developing, then we go into the 6 areas as a result and show what we really want to focus on ourselves. And then I would like to take you on a third stage to also show how we are going to then grow our market shares because gaining market share, that is, of course, above the market, needs something extra, how we are differentiating ourselves and how are we putting our opportunities even on a higher level. So if we start on -- yes. Now it works -- on the market development, I would like to start with the main 4 segments as the segments, of course, is a key driver for our business, and you can see here -- for all the segments you see the market size, the share and also the CAGR from the baseline of 2019. On the left side, you see our major one that we talked about, our strongest segment in general engineering. And here, you see with the baseline of 2019 the highest growth CAGR from all the big segments, which positions us quite well. On automotive and aerospace, I want to click one thing further and really focus on not only the more moderate CAGR from 2019 baseline but really focus on the 2021 onwards CAGR, what is very clearly showing a high recovery pace especially in aerospace with 12% and that we know that the commercial aerospace part is really still in a very recovery pace and continues for a while. When you look at automotive, also a good recovery pace in the years ahead. As we know, today, we are having still some supply issues that will last also until probably beginning of next year. Then we can see that in automotive, we are, of course, talking a lot about something else, and that is electrification. For that, I would like to take you to this slide. And the main conclusion for us on our 2025 strategy is that automotive machining potential remains flat. But then on the graph on the left side, a little bit more details, we can see that the amount of vehicles is growing into 2025 as well further into 2030 with a good pace. At the same time, the electrification continues, so the amount of electric vehicles but also the amount of hybrids keeps on increasing in 2025 and 2030. The numbers we use here for our pace in these calculations are coming from the IHS. We can here then see that by 2030, still 65% contains a combustion engine as hybrids, of course, still have one as well. That means that the cutting tool potential, the black line, on 2025 as such is still flat. But by 2030, the cutting tool potential goes to 97%. That means if you calculate that into a CAGR comes to a 0.4 CAGR impact for Sandvik Machining Solutions. One thing I would like to highlight here is as well the factor that we have been adjusting, that we use for electric vehicles, and it was previously 0.4. And we adjusted that upwards to 0.5. The background for that is that we have seen that electric vehicles are evolving. The needs and the demands of the compute consumers are changing. So we see more complex powertrains. We see more powerful engines, and we see also more 4 or all-wheel drives. So that has been clearly indicating that, that goes up from 0.4 to 0.5. And as a last point, I really would also to emphasize that, of course, in general, the aluminum but also the lightweight materials is growing, which create for us an opportunity to increase our market share in lightweight materials overall. We don't want to concentrate only on our big segments, but I would also like to highlight here and take a few fast-growing segments that we have put on our radar. And here, we talk about medical with a really good momentum together with electronics and die and mold from a CAGR even from 2019 base but also if we look into 2021 and onwards. Medical, very clear demographic shift; electronics, the consuming world is increasing and more consumable goods are demanded for; and die and mold is very much steered as well by an increase of component needs. So here, we see a great opportunity to build on those growing segments. Another way of slicing our market, what we need to do to understand fully the dynamics is also take a look at the geography. And we can see that the biggest market for -- overall from a market potential as well for us is Europe. And here, in the 2019 view CAGR, you can clearly see that Asia was the strongest growing from the early indications. If we then look on what has been going on now since 2021 after the pandemic, we can see that all geographies are still giving good growth. Still Asia is the fastest growing. And with that pace, of course, challenges Europe on a full market size by 2025. And also Americas, of course, gives us a good potential and has a higher pace in growth than Europe. So here, definitely, opportunities from a market potential. The last part, how I would like to look at the market to give some more flavor on the development and where we would like to focus on is the mid-market. The mid-market is growing faster than the premium market and that you can see on this bubble graph on the right. On the x-axis, you see the perceived value from low to medium and high. And mid-market, of course, is in the middle of the chart. Our premium brands are perceived more on the right side of this chart. On the y-axis, you see the growth rates. And there you can see in the middle field these orange bubbles have a higher average growth rate than the high perceived value. So here, of course, for the mid-market gives opportunities, and we also see a very different model. The quality and the performance of tools, don't underestimate that, they are very high demands on that. What the difference is with the mid-market is a lot to do with what is the service level provided regarding to this know-how and how to apply the tools as well as usage of much more distribution and channels into the mid-market. So with these trends -- I don't cover all the complex dynamics of the industry. But with these ones, I would like to take you in what do we then decide to go for, what are our 6 areas that I mentioned before. Here are our 6 areas. All these 6 are enforcing each other. So it's not that they are like totally separate and complementary. No, they are also enforcing each other, but each of them has a really own strong plan with crisp actions that we would implement to secure growth. The first one you see here is strengthen our position in inserts. Inserts is our core business, has been our long heritage on introducing new products every single year. With an average pace of 8 new products a day, we continue to build on our innovation in that field. On the other hand, inserts is also used a lot in general engineering and in automotive. And remember, the recovery of the automotive as well as the general engineering pace is supporting a good insert opportunity growth. Take a leading position in round tools is the second one. Round tools is growing faster than inserts, a lot to do with more 5 access machining, more near net shape. Round tools is also very much related to the growth segments I showed before, medical, electronics, die and mold and so on. Here in round tools for us, it is all about securing that we have a full offer and also securing that we have our footprint in all the geography areas. Become a market leader in mid-market is the third one. We have Dormer Pramet as our division in mid-market, but we can still grow there as we would like to be on the podium, on the top 3 in the market. Here, it is a lot about working, as I said before, with international channels and also focus on Asia as the growth there combined with mid-market is a great opportunity. Number four, grow outside of Europe. Here, Americas, Asia had a growth -- a higher growth pace, as we showed. And there, of course, our market share relatively is still smaller as in Europe, so our opportunity is there to grow. We are focusing a lot as well on local premium as that is in different regions like Asia and Americas, very needed to be local to customer especially if we combine it with a round tools area. Master the automotive shift. Here, we are continuing to evolve together with the electric vehicles and the electric engines as the whole industry is still evolving and getting new models there. We are securing a full offering, and that, of course, also has our focus for the future. And we built a lot on project work because of component approach is in this electrification and in the automotive shift an extremely important part, that means you need to offer and the capabilities. Last but not least, industry leader in expanded offer beyond the tools. Of course, all the tools and the core business, combined with connecting machining, combined with what Christophe was talking before, the know-how and the tool data, gives us, of course, opportunities to create more value for the customer and more efficiency and productivity gives us the opportunity for us to create new business models. With this view, I would like to take you then to the next step. And this last element is exactly the good bridge in how to take more market share. Taking market share generally, we do that a lot, as I said, with creative and bringing new products to the market, and that we will not change. We will continue bringing strong new products to the market, but we will also start working more and more with delivering machining know-how, and delivering machining know-how also in a digitized way through connecting software solutions. We can clearly see here in the customer value chain in these bold orange areas, that the areas where we are strong, where we have our offer and where we have an impact with our offer in the efficiency and value for our customers. We have data and know-how in each area from production and operation engineering into shop floor solutions logistics and also in machining. But the data and the know-how doesn't only stick to one single box. It transfers and goes from one into the next and accumulates the advantages, what also creates for us the opportunity to create those feedback loops you see on top and below. Then what concrete do we offer? Here, you can see it is a modular approach. So in each part of the value chain, we have an offer. As for on the left side, securing that we have the right machine to recommendations, but also with the CGTech offer, we have softwares that are giving tool path verification and optimization. In the middle part, we are able to secure tool identification. And if you haven't seen yet, you can take a look at the booth on the data matrix and the QR code but also vending machines and inventory management to secure that we are having our amount of tools in order from a customer perspective. On the machining side, machining data but also performance-based business models, and we will come back to that later on as well. So here, we are capable of linking the total component advantage and output for a customer to a full model. These parts can be seen as separate elements but also put together under one big project or consulting. And then, of course, the benefits that the customer will have is going to be cumulative. On the left, it is more around efficiency, predictability. But if we go to the right, it is more around productivity and CapEx gains for the customer. If they can, of course, link the full value chain together, then they have, of course, the full benefit out of that. This strategy is not something that we just started now. So we have been working with these 6 areas already in the previous year, and we want to show some of the highlights, what we achieved. Here on the left, we have been achieving a good traction with CGTech and our offering in the digital machining. We also have had the bolt-on acquisition from ICAM coming in and adding extra opportunity to expand that optimization and verification option. We work a lot as we talked with automotive customers in projects where we want to prove really what customer value and efficiency we can bring to them. And then also the data matrix, as we mentioned a few times today, is a unique tool to really own the data and have a full traceability of your tools at your factory. We are proud on sustainability that we achieved on all 4 areas our targets. Even most proud maybe on safety. Safety goes high up in our agenda. And here, we have had -- in 2021, we have had the best results and performances until now. On the acquisition side, we have been acquiring 9 companies since end of 2018, a value SEK 2.4 billion and all positioned in 1 of those 6 areas I mentioned before. And that may be in a bit more detail with round tools. As Stefan said, we have had quite some acquisitions in the past years, and that has been giving us more than 2% market share gain. And we are now close to be the market leader, not fully there but getting close. We see here on the round tools also very clearly the strategic direction. We want to be in all geographies in Americas, Europe and Asia. We also want to work with our different segments. So we cover the growth segments like with Yongpu with electronics, die and mold and also the electric part of the automotive. And Yongpu, on top, has a full value chain offer, meaning they are producing their own blanks, that's why make it such a local premium brand. Fanar has been adding premium quality taps that was missing in our portfolio and GWS has been also been supporting on general engineering and especially in customized solutions for the American market. GWS is also a company that has had a very good pace on acquisitions. And last week, we signed another agreement to acquire Peterson Tool Company. So they continue on that pace also moving ahead. Another area that we talked about is mid-market. Also here, we have had in the past year a very good momentum. Focus is, as we spoke, around Asia. We see growth rates from India and China above the GDP levels and also a lot to do with the focus on securing our increased relationships with the current international channels but also expanding on international channels. Cross-selling is something to highlight as well. In the mid-market, it's not a given. You can do the offering on both sides, inserts and round tools. We have the Dormer Pramet that can do both. So we can also support a cross-selling, so a customer has only one provider of those tool combinations. Then last but not least, expanded offer. We talked about CGTech. We talk about a great asset to bring into, combine to with machining know-how and tooling brands. CGTech reports into Sandvik for a month. So that means all of the CGTech customers today have access to tool data of Sandvik for a month. But CGTech needs to stay agnostic. They are agnostic versus the whole CAM machine tool builders but also all the tool suppliers. So here, you see an example how CGTech has been together with Seco being in the aerospace driving a customer project that realized 25% cycle time reduction. So this is definitely for CGTech further to develop with all different brands within Sandvik Machining Solutions and beyond in the market as they will stay agnostic. These all lead up to very good achievements the last year on our road of growth. Then also, we have previously set a few targets that we are now having new view on. So we still say that our growth will be above the market when we talk about our organic growth. We still will have 50% around acquisitions to complement our offering and in the different geographies, as we spoke about. But the revenue CAGR from '19 to 2025 will be 5%, what previously was 4%. And when we look into more forward-looking from 2021 to 2025, that results due to the pandemic in between into a CAGR of 10%. We also increased our expanded offer. Previously, we said additional SEK 1 billion, and now we have plus SEK 2 billion by 2025. Another way of looking at it is this bridge. So in 2019, Sandvik Machining Solutions was, before the pandemic, around SEK 40 billion; in 2021, SEK 35 billion. And we are adding market growth component, market share growth and M&A component into this. And then, of course, when we talk about market growth and market share growth, that is including core business as well as expanded offer. This is where I would like to leave the Sandvik Machining Solutions part and would like to get Christophe Sut back on stage as we would like to give a bit of a view on where is our vision regarding Sandvik Manufacturing and Machining Solutions. And I think here, we have heard a lot about expanding our offer above and beyond what we said in the beginning, Christophe. And I think here, what we really aim for as a vision is that Sandvik establish itself as a leading actor in the closed-loop manufacturing for component manufacturing.

Absolutely, Nadine. Thank you. And I think that what is important is -- in what we try to convey is the fact that we are really mixing here the core knowledge of Sandvik with the best of the digital world, and that's what's enabled us to start that journey actually.

Absolutely. And I think to emphasize that strength again, we would like to highlight what we talked earlier in the presentation about our unique market position. We are having 2 separate very strong business area segments with each an own agenda, an own growth plan with own strengths and own position. But if we put it together, we can highlight that we have 400,000 software seats together in Sandvik Manufacturing and Machining Solutions. And that includes then across industrial metrology, across operations, engineering and as well with all the acquisitions in the CAM space, that's where we have the largest seats. Will also, of course, add to this picture. Then we are having a unique position as well with in Sandvik Machining Solutions with around 100,000 direct customers, a huge reach that we can have in the market. And that has been giving us 20% market share. And then maybe not to forget as well in additive manufacturing, we also have a leading position in the powder. So many different angles. But if we combine those different elements and really see that, again, the core business together with the software solutions and the know-how, put that into a digitized manner, we are able to create a good jointly offer. But we are still in the beginning of delivering that, but we have a good platform to grow and accelerate from, which we can demonstrate with this slide.

Yes. And we promise, we will not ask you to explain the slide in detail at the end. But if you have question, we will be happy to get back to you. Because I think it's a very important slide, and this slide we can build because of the knowledge and experience we have about manufacturing. And what you see, starting from the left side, is all the steps you're going to take from component design, making sure that you will optimize the tolerances from their defined measurement plan that will allow you to do the control at the end, create the codes that will allow you to drive the machine, select the tools that will be used, make sure that the tools are available and from their enabled machining of the component. All those steps are key in order to reach the maximum efficiency. And what I think is interesting is not only that we have some understanding of it, but the fact that with all the assets we have acquired, we have started to fill those books and make sure that we can really impact the market by creating those scenarios that enable a closed loop manufacturing. So unless you want to learn it by heart, at least you can materialize the fact that, well, a lot of assets here are closing the loop and coming as building blocks that help us to understand what -- to help us to deliver the promise we have to our customers.

And I think if we want to take it one step further then and say that, yes, those gives a lot of opportunities, it also creates a lot of opportunities to create new businesses and also create new revenue models. And maybe it is good to give a few examples, so you can position this big graph in a few more concrete examples. One, for instance, is paper part. And when we really kind of close the loop and connect all the bits and pieces of the manufacturing process, that creates huge benefits as we saw previously for customers. One ability we have now is really to go more as to paper part. A customer who wants to pay for performance, not for input, not for anything they buy before something is done but really pay for the outputs, this is, of course, something that is very much related and possible for a provider who can show proven performance improvements. So if you cannot show proven performance improvements, this will be a hardship to drive forward. If we then think around what Sandvik has been able to do in a lot of different sites that we have been hearing from your side, Christophe, but also from ours is we have really great abilities to show and to quantify the efficiencies and the gains. And through that, we can really show proven improvements and that we can build into a performance-based model. The advantages for customers, of course, in all this is that they have one speaking partner. There is one owner that they need to refer to. There is one who takes the overall responsibility. And remember, the skills gaps, the competence gaps that everywhere is present and all the labor issues that is ongoing, this, of course, gives an opportunity for a customer to really give it a trustworthy to a main partner. So this paper part is really an opportunity for us to also secure a close integrated and loyalty with customers but definitely a customer can give in full trust, performance-driven approach to the providers.

Getting back to something we discussed a little bit earlier, if you remember, with the case of the electrical rotor and the machine that was doing the measurement, I mean, we believe that moving quality insurance to the manufacturing line is going to be a revolution in manufacturing. And it's a needed revolution because there is many industry that request this level of quality of measurement and speed in order to scale, so that we have extremely big ambition in that one. And we are very positive in the sense that we here really enable industry that need to go, can be in the electrical vehicle. It can be in the industry related to medical, where you need to take measurement of processes where you need a high level of precision. And the more you guarantee that, the more your production is sustainable because you're not going to throw away a part and the lower your cost is. So that is another example on how bringing things together we really can create and make a difference.

Another example is around tool data integration, and closed-loop manufacturing really creates the opportunity to have a full tool data integration. We know that in the whole manufacturing process, we talk always a lot about, it is the biggest data provider part in the industry in the machining industry. But if you take around tool data, what is that? It is huge, it is broad because tool data is around the dimensions of the tool. It is the recommendations on which cutting data to pick. But it's also the methodology, how to use the tool in the right strategy into your workpiece. It is also exactly know where the hell is my tool in the factory, where can I find it, how many hours has it already been working, does it have had a reconditioning, yes or no, has it been ready to go on a recycling or not. So there is so much tool data that is available. And tool data integration would mean that at any point in time, in all the systems and in all the different steps of the manufacturing processes, that tool data will be at hand for those who need. Meaning if a designer needs to kind of design a component or make a quotation, they can draw on all the tool data that they need to make a fast and most accurate recommendations on a cost per component. Then if we have later in the process and you need to make a correct production planning, you will know exactly where the tools are, how many you need, how much -- where you have and how you control your utilization, maximizing on your machine. It is also around, at the end, when we put on exactly on the machine to optimize the strategy. So at any point in time, the customer becomes -- having a very convenient situation, has access to all the data at any point in time. It also -- it is a very trustworthy situation because they have all the data that they can rely on. So here, it is more for them a seamless flow that they get in their full manufacturing process. And for us, again, the ability to integrate very closely with our customers, on the other hand, also to learn a lot because this tool data integration will create a lot of feedback loops, what continuously can give inputs to improve.

And then closing with manufacturing, I mean we are in the metallic components shaping solution world. And obviously, we are extremely present with our tools and our CAM software in that field. And that's mainly through subtractive technology. Then there is additive technology, as you saw before, that is growing at a high pace. And what we can see is there is 2 trends. One is that workshops are going to become more hybrid. They will use different technology depending on the volume they need to produce, the complexity of the components they need to produce. The process are also hybrid. I mean even if you will produce a component using powder and additive technology, you will finish the component, you'll be using subtractive methodology and using, for example, wrong tool in order to get the right finish of it. And therefore, it's very important that we master the 2 technology because then we really bring value to the customer in their transformation journey and in moving forward in adopting new technology. And that's something that matters to us. And it's also technology that are extremely data-driven, tool data, powder data are element we master and that we can make our customer benefit from.

Yes. And I think if you remember the big boxes, there are a tremendous amount of combinations you can find in those to find great opportunities in new models. But I think here, we want to close this session on Sandvik Manufacturing and Machining Solutions. I hope that you really clearly saw that we are on a journey to grow on each business area segment separately with very much different opportunities for both of us. On the other hand, we are both on the journey of expanding our offering above and beyond and that we are there to take steps into -- have a jointly offer that comes to play with combining core businesses and really connecting software solutions, all of that on the road to create a closed-loop manufacturing for component solutions. Thank you very much. And then we ask Louise to join us for Q&A.

Thank you. Nice to see that you're so excited about this. And indeed, interesting and comprehensive on how we, with our leading positions and know-how and now strong acquired assets, can create further value to our stakeholders. So we are ready, seated, and now let's take a few questions. And now we don't start with you, Klas. We start with Daniela Costa, please.

Just one question. Regarding the day-to-day management of all these new businesses, especially the ones around software, basically a 2-part question. Are you kind of merging them all into one same structure? Or are they staying largely separate? And related to that, I guess, very different to incentivize people that come from a software background, used to grow at big double-digit growth rates versus integrating them in a more traditional manufacturing structure. How do you deal with different incentives? If you can give us like some insight into this.

I can start by answering your first question. I mean, obviously, we acquired companies. With companies, we acquire people and knowledge. So for us, it's very important that those companies keep being managed on a separate basis. Then what we do is we support them in their growth project, and we support them with the added value we have because of our common history in manufacturing. But I think very important -- I mean, we have decentralized model. Those companies have a growth plan. They continue to deliver on their growth plan. We even accelerated in area where we see the opportunities, and then we create synergy on top of it just because we have the same heritage, we meet the same people. We understand the same thing and we realize, let's do that together, we can achieve something bigger. And then if -- in a way I answer the second question. I mean, we have people that know how to manage salary and things like that within the frame and of business they are operating into. So it's just a natural step. I mean we offer our employees packages that are in line with market expectation, then it depends what you do.

And I think it's also very clear if we are talking about this mixed -- an offer that has mixed sources from both sides, we can definitely see, in our core business, the development of next-generation inserts or tools is absolutely totally something different than developing a software solution. But at the end, what we always do is put use cases with a customer in front of the picture and see what is the need and what is the problem or the opportunity that we are going to develop. And then we bring, of course, teams from both sides under 1 focused project, also, together. So we build on the strength of both original sources, so to say.

Thank you. Klas at Citi. So I just want to come back to Slide 96, and also 95. So you're saying that revenue CAGR that you're looking at is 5%. And you say 50% from M&A, which is then 2.5% organic, and you say the market growth is 2%. I'm just trying to understand whether you undershot the market because of bigger arrow in the beginning of the period '19 to 2025. Because 2.5% organic versus 2% market is higher but it's not that much higher. So I'm just trying to understand the logic there a little bit more.

Yes. Of course, I mean, when we look into 2019 and 2020 and the pandemic, it had a huge impact on our CAGR. But if I think -- if you look to from 2021 onwards, it is very clearly that we still work with 50% on acquisitions, and we have an organic growth of half of that. So I think the CAGR moving from 2021 onwards in the market is more a 4 percentage, and that we are organically want to grow 5%.

Okay. From 2021 to...

Onwards. Yes. Exactly.

So the half is also for the 10%.

Yes.

Okay. No, that's helpful. Then I have a question on the autos headwind, and that was helpful, and it's good to see that your content is moving up on battery electric a little bit. But beyond 2030 -- I mean, eventually, we will go to a world with no ICE. I think you've said before that we talked -- that you had as a base case a 1% drag for the total SMM business in the long run, but you still have quite a lot of hybrids in there, and there is starting to be consensus that we will live more in a battery electric vehicle world rather than hybrids, and now I get to 2% plus longer term when I do this. You are presenting a very strong message on the offsets. But are you now saying that even long term, all the 6 strategic areas can offset also perhaps a 2% drag? It's a big focus for investors in the market toward its -- Sandvik Machining Solutions can offset the 2%. So I'm interested in your more longer-term thoughts.

I think that I would not make any confirmation on the 2% as such. I think beyond 2030, we don't really give any strong indications. I think we have our factors that we work with, and then also we have on -- until 2030, we use the IHS numbers. Of course, afterwards, we know that ultimately, the amount of hybrids and the combustions will decrease. But I think on the -- you can calculate yourself on the pace how that goes. But if we think around the impact, it is more in the area of 1% CAGR that I think we should relate that to. And that, of course, is something that when you look into our ambition plan on 2025, that, of course, is not seen as a magnificent headwind then when we talk about our growth ambition.

That's my point. And just to finish off on my point is that the results of the spillover effect from having SMF and taking share of inserts because you have this continuous offering integrated versus the discrete offering that your competitors have. So obviously, that can also perhaps help the inserts market share going forward. I'm talking longer term. I'm not talking 2025. Is that also...

I think longer term, there are opportunities, I think, in all different areas. We have seen on the growth segments. We have seen, of course, aerospace is still on the way up. I think long term, there are definitely, for both inserts and round tools, still very good growth opportunities as the world is still consuming and is moving on in technology. And the combination, of course, when we look into our ability to gain market share, as we presented, is a lot to do in the ability to differentiate from anyone else in the market, and that is exactly this unique position and the combinations that we can create, will give us a head start and be in front of that opportunity. So that should give us market share gains in both software. But I think for us, in the Sandvik Machining Solutions, it's a lot about these softwares create a revenue stream on its own, but we should not forget that, that is creating a lot of additional core business. And that, of course, is one of the main reasons for us to be strongly committed to this combination.

Andreas Koski, BNP Paribas Exane. Two questions for Christophe. The first is on automotive. You have 24% of sales to the automotive segment, and I guess that quite a lot of components going into the internal combustion engine are being designed by the software tools that you are selling, and verified by the metrology tools that you're having. So what will be -- will the impact be on your automotive business when we go to more battery electric vehicles?

Yes. I think that there is 2 dynamics related to automotive for -- to our software business for us. There is 1 dynamic that is based on, I would say, the adoption of this type of solution. And what you can see is one of the driver is the fact that today, still a lot of machine are operated by experience of the person that is running the machine. So there is still a bigger upside on penetration against shift in type of component that are produced. Then there is a second side of it, which is we get an upside because of automotive, because it differentiates the type of component that our manufacturer, meaning that it requires more precision in many cases, which is more complex machining, 5 axis or beyond that, that have difficulty to be managed manually. Then you absolutely need software. And then the second element on the metrology side is we see a lot of component now coming that will need a different dynamic. So I will say, for us, the dynamic is penetration, and that will be positive. And it's also more complex components to take care of from design to measurement, which, from a software perspective, is also positive. So we have, in a way, the benefit of that more than a rollback.

That's great. And then the second one is on your margin target of 20%. My understanding during your presentation was that a large part of that margin uplift from the 10% where you were in 2021 will come from synergies. But where are you in terms of gross margins? And what kind of organic drop-through should we expect for SMF going forward?

Well, I think there is 2 things. There is 2 things to consider. One is obviously we have 50% of our business today that is a software business, meaning that this part of this business is highly scalable. And that's one of the components to the journey to 20%. I mean as they continue to grow at a high pace, they contribute to that, for [ that ] part. Then the second element is some of the business we have are in a start-up phase today, so on going to scale over time. So I think that 25% and [ 2.5% ] is not the end of the journey. It's the first step of the journey that will build a more stable model at a level that contribute to Sandvik.

And our last question for Nadine. And maybe I misunderstood, but did you say that you have an organic growth target now of 5% for Sandvik Machining Solutions in total?

We have a total CAGR from 5% from '19 to 2020, and 10% is from 2021 to 2025. And we have an acquisition target that is like almost 50% of that. So if you have looked to the organic part, then that is almost half of that growth.

And that's including the automotive headwinds that we are seeing?

Yes, of course. That is including.

Yes. We have a question in the fourth row.

First off, a clarification perhaps on the automotive headwind. So just to be clear, you spoke of a 0.4% negative CAGR to 2030. Is this true for the entire 20% automotive exposure for the division? Or is there any part that is not impacted by this?

No. This is the full impact calculated. So -- yes.

Okay. And the second question is you spoke a bit about moving towards in-line metrology, Christophe. Why is this an area that you're targeting? Is it sort of a strategic fit that's good for Sandvik? Or is it less competition when we look at the big dogs in this market?

Well, I think there is several reason for it. I mean, first of all, you -- by going to in-line metrology, you addressed the complex manufacturing components. So that's where the data you're going to get and feedback to the rest of the loop will bring the most value at the beginning of it. Then the second area is a shaping market. It's something that is starting, where place has to be taken. So obviously, it's a good place for Sandvik to be in, knowing also that we have very good software to enable that. So I would say it's a combination of both factors.

Daniel Johansson, Pantechnicon Advisors. I have a question about a tailwind at least for now. Energy. I think Stefan made a point several times on the call that energy was pretty strong for you, especially in North America, and also April had seen good trends. So can you please talk to what you actually do in energy, what the drivers are for that business? And what portion of your North American business that is? And also, if you think about the market for the energy market, how far away, for your products, are you from the peak, the previous peak?

When we talk about energy, it is for us, oil and gas, and also some of the renewable part, but oil and gas is mostly part. And then for us, it is a lot with -- when we think around the threading operations in -- and that is turning operations, what we have in that area. And yes, we have seen that oil and gas opportunities in Americas and also, I would say Europe gives us now an increase. But also here, we must say that during the pandemic, some of the business went down. So it is, of course, partly a recovery. And then, of course, we see now, especially in Americas, stimulated due to the geopolitical situations, a stimulation in the oil and gas for the time being. But if we look on the sizes, you have clearly seen that, that for us is not one of the bigger segments. So that is more a third or a fourth segment, after the general engineering, automotive, aerospace and energy, and that is really only kind of 4%, 5% of the total. So it's not for us, the total energy then, including renewable.

Thank you. So now we will move on to the last speaker. So with the last speaker, we want you to have some energy left. So I think Anders Svensson, who is soon joining the stage, deserves some more energy. So for those of you who wish to, just stand up for a while and shake your legs. And while Anders is coming on stage do that, and welcome Anders Svensson, President of Sandvik Rock Processing Solutions.

Thank you very much, Louise. Thank you. So hello, everyone, and a very welcome to the Sandvik Rock Processing Solutions part of this presentation. We are the newest business area within Sandvik Group as we were formed on the first of January 2021, and I hope you have enough energy now to go into the last presentation and listen to our strategic priorities to implement our shift to growth strategy. So we start with a brief introduction of Sandvik Rock Processing Solutions, which we call SRP for short, and I will do so going forward. Our revenues in 2021 were SEK 7.6 billion. We had an adjusted EBITDA margin of 16.6%, and we have roughly 2,000 people employed that work towards our different customer segments, where 47% of our exposure is towards the mining segment and 53% of our exposure towards the infrastructure segment. 52% of our sales is aftermarket products and solutions, and 48% is equipment. We have 4 divisions that work across the different geographies, and we are fairly evenly split between the west to east, but we have some weight on the northern hemisphere as we have a strong footprint in U.S. and Europe within the infrastructure business. So we will start by looking at our demand drivers for growth. So the first one is sustainability, and our customers needs sustainable solutions, all the way from installation to during operations, and at end of life. And if we start with the mining side, the mining process is extremely high energy consuming. So we need to have electrification, process efficiency and productivity, and those are key to reduce both cost and emissions. If we look at the infrastructure segment, the end customers for the infrastructure products puts a lot of demand. And those end customers could be us, normal people, putting in demands on sustainable solutions or productivity of houses, et cetera. But we also have loss regulations and installation permits of, for example, a stationary crushing and screening plant. So those drive the same behaviors towards productivity, electrification and efficiency. The second one is mineral demand and infrastructure spending. And both Stefan and Henrik mentioned previously the growing middle class and the higher consumption that leads to when those people want houses, want cars, want electrical appliances, et cetera. If we combine that with the declining ore grades, it leads to that more crushed stone is needed to deliver to those increased demands. If we look at the infrastructure segment, just the demand to maintain the current buildings and infrastructure in the world is huge. And if you then add on that those middle class -- new middle class people want to have cars, and they want roads to drive, and they want the houses to live in. So that further drives this infrastructure spending going forward. And the third one is about automation, digitalization and digital services to improve efficiency and productivity through operational insights. If we then look at our underlying market growth. So we have heard a bit about this previously from Henrik, for example. But the mining industry in general, there, the output growth about 2% CAGR going forward. There is a combination here that you have electrification minerals that go much quicker, and then you have bulks like coal and iron ore that grows slower. But the average is 2% of growth. In the infrastructure, we have 3% of growth, and that's normally quite well in line with GDP development. And here, Henrik mentioned, tunneling is growing a bit quicker. Aggregates is roughly on par with that, and then demolition recycling is growing somewhat slower. So if we weigh these subcategories versus our exposure, we then get a weighted market growth of about 2.5% to 3% going forward. Now we'll talk a little bit about where we play in our customers' value chain. As we are a new BA, I mentioned this to get an increased understanding of where we play in the customers' value chain. So we are not in the rock extraction phase in mining. This is where SMR has a strong position. We are in the rock processing phase, and the rock processing consists of the crushing and screening stage but also the grinding stage. And after that, you move into the separation phase where you separate the valuable mineral from the carrier rock, and we are not in that phase either. But as you can see on the picture, we have illustrated moving a bit towards the grinding phase. This doesn't mean that we will start manufacturing and supply grinding equipment. This means that we have an ambition to improve the crushing and screening step and widen that window to produce smaller-sized rocks so that the grinding step can be shorter. And I will come back to this later in my presentation. If we look at the infrastructure process of our value chain, we're also not here in the rock extraction phase. SMR is somewhat in this phase. But we are in the crushing and screening stage. And here, the target is not to reduce stone sizes as much as possible. Here, the target is to produce stones of the right size, shape and form. Because we are producing an end product here, and it could be road ballast, it could be railway ballast, it could be sand, et cetera. And if you look at the right-hand side, we have a typical crushing and screening process. This one is the 3-stage process. It can be for either infrastructure or mining. Starts with on top there with the primary crushing step, and then below, you have the secondary crushing step and then you have a tertiary crushing step. And if you -- if this is the mining process, it then goes further on to a downstream process with grinding and separation. But if it's a construction or infrastructure process, this plant then produces the end product. The reason I want to show this is that a plant like this can last for 50-plus years at our customer sites. And over time then, the worn-out equipment is replaced. So a lot of our business is replacement, and not only new full plants. And also, over time, our customers are replacing, and they're not necessarily always replacing with the same OEM that manufactured the plant. So over time, many plants has a tendency to become mixed OEM plants. And I will come back to this also later in my presentation. So now we're going to focus on the key strategic initiatives that we do to drive our shift to growth strategy. The first one is enhancing our core business, the next one is expanding in value chain and market channels, and the third one is enhancing our digital offering, and the fourth is to provide leading sustainability solutions. So we jump into the first one, enhancing our core business. And here, we target to maintain our leadership in material technology to extend life and improve efficiency. And extend life, I mean extend life of our equipments and aftermarket solutions, et cetera. And then we target to -- during the lifetime of the equipment, we should be the one that provides the most efficient and productive solutions for the aftermarket and services. So we put the target for ourselves here to increase our aftermarket penetration by 30% from 2019 to 2025. And to achieve that, we need to develop aftermarket solutions and services that fit all our customer needs, and that can deliver high productivity. Now I come back to what I said regarding a site that lasts for 50-plus years, and it has a tendency to become a mixed OEM site after a couple of decades. So we want to be able to service those mixed customer sites in the future. And the last point on this is that we want to enhance our business through acquisitions and strategic partnerships in core and adjacent technologies and/or markets. One example of that is the -- what you have on the right-hand side, it's the acquisition of Kwatani, a South African-based vibrating screens and feeders manufacturer that we acquired in the second half of last year. Another example is what we should have -- sorry. What we should have -- our recently announced acquisition of Schenck Process mining business. This is a very complementary acquisition to the current offerings that we have today. They have a really strong, high-capacity screens and feeders solutions, and they also have screening media. There is limited customer overlaps and a limited -- very limited geographical overlap, and this will then improve our footprint and improve our market position. It will definitely strengthen our customer value add within the mining, crushing and screening solutions and processes because we will be able to deliver and offer a full solution for high capacity mining, crushing and screening. Schenck Process mining has a very strong aftermarket position. Stefan already mentioned it, it's about 70% of the revenue. So this will further enhance our revenue and earnings resilience going forward. It will take our aftermarket of 52% of sales up to 55% to 56% of sales. Maybe I will change the battery or something. Sorry about that. The next one is expanding value chain and market channel. So it's about strengthening our customer value add for being a full solutions provider within crushing and screening, and not only the mining, crushing and screening, all crushing and screening. And here, 1 example could be what we did, acquisition of Kwatani or Schenck Process mining. But it can also be more organic initiatives, and one that I want to mention is that we, through fine crushing, then want to expand in the value chain, and I connect back to what I said previously in where we play in the value chain that we want to expand the window where crushing and screening is relevant for our customers. The reason for doing that is that crushing and screening is a more energy-efficient way of reducing stone size than grinding is. It's also a dry process. So if we can extend the window where crushing and screening plays for our customers, we can then help our customers to have a lower CapEx investment, to have lower OpEx running costs and to have less energy consumption, and also less water consumption. The second part of this slide is regarding our market channels. So we say that we want to grow our indirect channel to market 20% faster than we grow our direct channel to market. We'll do this through developing our distributor business, and here, it's very important that we select the right partners because we want our customers to be able to buy a Sandvik crushing and screening solutions by our partners. So that means equipment, aftermarket solutions and services. So you should get the full package when you buy a Sandvik product. We also intend to increase our OEM sales channel, and this is where other companies buy our products, and brand them as their own. The next part is expanding our digital offering. It's about automating our customers' production process and then connecting our equipment, collecting the data, and then through data-driven insights, giving condition monitoring, but also making predictions based on artificial intelligence. And that can be failure predictions, that can be maintenance planning, et cetera, et cetera. And we combine that with an e-commerce and inspection tools and communication tools. We call our digital service platform SAM by Sandvik. And we released constantly new services on this platform to our customers. So it's an ever-evolving platform. And this is to maximize our customers' productivity and efficiency, of course. It is also to enable us to offer to our customers performance contracts that are competitive, and that we then can supply that with the lowest total cost of ownership for our customers. On this slide, we have 2 targets. One is to have more than 60% of our customers utilizing our digital services by 2025, and the second one is to increase our number of service contracts by 15% per year. And next, I will show you a short video illustrating a bit what I talked about on SAM by Sandvik, but probably explained better than I did. So let's see. [Presentation]

Okay. So moving on to that we want to be providing leading sustainability solutions, sustainability offerings will be key for the future, and it will help us to drive our growth agenda. Electrification is, of course, one of the key ones. And if we look at our offering today, 100% of our stationary crushing and screening offering is already electrified. When we look at our mobile crushing and screening offering, we have -- today, around 60% of our offering is available with an electric option. And our target is by 2025 to be able to offer above 90% with electric option. But not all of our customers can use our electric offers because they are not in a place close to a power grid or et cetera. So they will need a diesel alternative or an alternative to diesel. So we have, together with our engine supplier, approved all of our mobile crushing and screening units to be operated on hydrotreated vegetable oil, or HVO oil -- HVO fuels. And HVO fuels can reduce greenhouse gas emissions by up to 90% versus diesel. So it's a good option. The next one is an end-of-life offering that we have. It's about our foundry facility in Svedala, Sweden that buys back worn out crushing chambers from our customers. They use them as raw material and melts them and then produce new crushing chambers that we then sell back to our customers. And over 90% of the material used is recycled steel in that foundry. And we also have an Environmental Product Declaration for those crushing chambers. And I believe that we are the first in the industry to have that. So what have we achieved so far? We have grown our aftermarket penetration through increasing our service contracts, through our service techs and service engineers, working together with our customers to optimize their production processes and developing suitable offerings for our customer needs. So we have grown our aftermarket penetration with 9% since 2019, and we have a target of 30% to 2025. Secondly, enhancing our core. We have made 3 acquisitions, and we are in the process of making the fourth. So the first one is Allied Construction products, providing us with a footprint in North America. The second one was SHANBAO, which provided us with a local premium stationary crushing and screening brand. And then we have Kwatani, which we acquired last year, then offering us a footprint in South Africa, and now with the mining part of Schenck Process. The third is launching our digital offering. So we launched this SAM by Sandvik in the middle of last year. This is a continuous developing platform, and we will offer more and more solutions for our customer on this platform going forward. And the fourth one is then providing leading sustainability solutions. Here, we still have work to do, of course, but we have still 60% of our mobile fleet is available with an electric option. And we also have HVO fuels approved to be used in the ones that aren't. And Stefan also mentioned our REBORN concept in stationary crushing and screening division. This is where we can take a worn-out crusher, replace the main part, keep the auxiliary equipment and the customer will then have a cost-efficient solution for a new upgraded crusher with full warranty that is also environmental friendly. And the last picture is then our recycled-produced crushing chambers in our Svedala foundry with an Environmental Product Declaration on. So if we look forward, and a little bit backwards, so we start with 2019. There, we had a top line of -- or a revenue of SEK 7.4 billion. We then add on to the underlying market growth. We add on our enhanced core initiatives, and those are mainly then acquisitions, but some of them are also organic. And then we add the aftermarket capture rate initiative that we are driving. That will take us to SEK 13 billion to SEK 14 billion by 2025, and that's then a CAGR growth of 10% from 2019. And that is, of course, enabled by having a strong digital and sustainable offering. So summarizing without going through everything once again, we are leveraging our existing position to enhance our customer value, and we're also broadening our reach and also broadening our offering scope to our customers. If we look a little bit further out. Our vision. It is to become the recognized #1 within sustainable rock processing. We intend to be the market leader within crushing, screening and breaking solutions. We want to offer a productivity leadership by data-driven insights linked to a strong aftermarket and service offering, and we want to provide our customers with the most sustainable solutions within rock processing. And I think this is my last slide. So thank you very much for listening. Sorry for the hiccup with the page mover.

Thank you very much, Anders. Great presentation. It's indeed obvious how sustainability is such an integral part of our offering and our growth opportunities ahead as we've seen throughout the day.

So do we have any questions for Anders? Yes, please.

Just couple of relative straightforward ones actually. I was just wondering, within the mining part of the division, is the end market exposure in terms of the minerals that the mining parts exposed to similar to -- for the other Sandvik sort of mining business? Or is it different in any way?

I would believe it's fairly similar. The strongest one is copper, then it's iron ore and then it's gold, in that order.

And then related question basically. Again, if you look between the mining and infrastructure pieces, is there a difference in the aftermarket between the 2? Is it more important on one side or the other?

The aftermarket is stronger in mining normally, but that's not because there is no wear and tear in infrastructure. It's because you run the mining business 24/7, and that's more rare in infrastructure. But otherwise, you can have very high wear applications and hard work also in the infrastructure applications.

Yes. We have a question over there, and then over there.

One question regarding the aftermarket. Could you go back a bit further, let's say, to 2013, 2014? What share of revenue was off the market at that point? And I guess that you are aiming for a similar market share and a similar aftermarket penetration as in Sandvik's other mining business 2025.

Thank you. Yes. We have done that -- it's a restate backwards, et cetera. So -- but we have done that. So it was approximately 35% or so, and now we are at 52% then.

And I guess that's one of the main part for the quite nice improvements in profitability.

Absolutely. So if you go back to 2016, where we have more clear numbers, the aftermarket growth has been around 10%, and equipment about half of that.

Yes. Daniela?

I'll ask 2. My main question was actually very related to this, but maybe just to follow up. You still have another 9% going to 30% on top of the 9 percentage points you did on aftermarket penetration. I assume aftermarket is maybe what double the margin of OEs. So could you get closer to the bend of the '20 to '22 for the group if you didn't do any more inorganic activity, just from an organic perspective?

With the different acquisitions that we do, like the mining part of Schenck Process, we tend to grow that. And to grow that outside with our [ strong ] today, that needs to be a lot of equipment sales, and beginning to get an installed base. There's also a lot of investments going into automation and digitalization, et cetera. So I don't think it would be fair to expect a big jump in our profitability going forward, considering we're also already basically a market leader in terms of profitability within our sector. So I wouldn't expect a big jump upwards.

Okay. And then just following up, you mentioned obviously, you're not in downstream. Some overlaps there, but why not being in downstream? Would that be interesting at some -- further down the line?

Yes. We're not excluding anything, right? But a high energy-consuming downstream process I think is looking for a transformation going forward from traditional technologies into something new, but I'm a bit speculating. Well, it's not on our agenda today.

All right. Thank you, Anders. Stay tuned because now we will actually invite all the presenters up on stage and do -- if there are any questions left, they will all be on stage. So take the opportunity to do your last questions. Welcome. So all lined up for you. No pressure, but please take the last opportunity now to ask your questions. Yes. Let's go for questions.

Okay. Anders Idborg, ABG. Can I come back to the first -- the question during the first section? So just going to ask you about the recent growth rates, particularly in the CAM area. I saw that you had a growth rate for that market of 7%. I probably had the impression that these acquisitions have had better growth rates and you have higher ambitions than that. So could you fill us in?

Yes. I mean when you look at the 7% we line up here, it is a 5 years average. Then if you look at the way CAM business have been trading over the last couple of quarters. It has been above that, and the assets we have, have been performing in a very good way compared to the market, that's for sure. But I will say that long term is in the range of 7%. Then we will add on with the value we bring above it, but that's the average growth of the market.

Klas from Citi. I just had one final follow-up for you, Nadine. And that is coming back to the SMS and the M&A contribution, and that Slide 96 seems to be my favorite slide, so half of the SEK 17 billion from M&A, that's SEK 8.5 billion versus, for example, SEK 2 billion in round tools in 2021, I think. So that's sort of buying at a higher rate around SEK 3 billion going forward up until 2025. So how much -- the majority must be round tools, right? Because you have a clear market share ambition of being in the podium you've said before. So I'm just trying to understand, is that the correct interpretation of the SEK 8.5 billion?

I think the -- when we look to the acquisitions and the direction, it should support all offerings. Of course, round tools, as we are not there yet on our ambition as we talk about becoming the leader there, of course, we would continue on acquisitions. On the other side, when we look into growing the mid-market as we also won there from a smaller position or a lower position today, also get into the podium ranking. It will also be acquisitions into mid-market, for instance. If we then think around our offering in general, like the Fanar one was also a very good example -- in relation to tap some parts that we are not having. Then of course, it is when we talk about the growth segments also in some of those areas where we feel that we can, through acquisitions, expand our offering or accelerate the growth base, then we will not shy away of exploring in those. So I would say it's a mix, but there are clearly a few areas that you can see where we have higher ambitions than we are today, we can take another leap with acquisitions.

Stefan, [ Gunther ] with [indiscernible]. I just have a general question. I mean you have quite ambitious growth targets, which is interesting and exciting to see, and it goes both organically and inorganically. And the organic growth -- I mean it's like one of your competitors says, it's more feet on the street, but it comes to the acquisition side. Could you highlight a little bit how you evaluate your acquisition targets? I mean how much do you value the ongoing profitability? How much is strategic value? How much is cross-selling? How much is cost savings? And getting growth is easy, but to get value is more difficult. So please.

Thank you. Thank you for stating that it's an ambitious growth agenda. When we were at 5%, it was too conservative according to some. So I guess 6% would have been a perfect target then. But anyway, we go for 7%. And to get your question, I would say, in general, on valuation, and when we look at the business cases, I would say we try to be fairly conservative. And we'd rather be honest to ourselves and say we're going to pay an extra multiple then try to get the multiple down by coming with a too-optimistic business case. I'd rather have that discussion then in the team and with the Board. As always, when you do valuations, you do a combination, of course. We would look at trading multiples, DCFs and so on. But again, we try to be very careful with overstating synergies in a DCF, as an example, because we all know they are easy to put in the PowerPoint. It's a lot of hard work to actually make them happen. And then it really depends on what type of acquisition it is, whether it's more of a cost bolt-on, where you can have more easily-identified cost synergies. SMS, for example, will typically have a portion where they know -- they have world-class cutting tool plants, and they will look at an acquisition target and say, we can do x, y and z to improve this. Not a problem. It's a matter of some time and get the right competence there. They know they have a global distribution network. They can leverage. They have supply chain. They have a powder supply. So they can look at that and value that, I think, fairly good and be quite confident. Then we are careful with the cross synergy aspects, because that's -- it's so easy to put in big numbers, and it's so much hard work to actually get it to realized. As an example, when we look at the software acquisitions, we have talked, and you have hopefully seen a lot of the opportunities we see, with combining our hardware and software offerings. But we have been very, very conservative with putting those things into a business case. Deswik, for example. We haven't put a single extra machine into that business case, but we are confident with Deswik, it will also help drive a few extra machines. But you just have to put 10 machines in, and suddenly the business case is too easy, if you will. And so we are very conservative with those kind of things. And I still think we all feel we still have plenty to do with terms of work to get the synergies out that we have promised ourselves.

Yes. Thank you. And we have a question here on the first row, Daniela Costa.

Thank you. I guess we talked a lot about the headroom for M&A. CapEx is stable. I was wondering in terms of capital allocation on working capital, if you could comment, given supply chain is such a big topic at the moment. And I guess, to grow faster than peers, you probably need to be also faster and more nimble there. If you can talk about the long term and maybe also the near term and the situation around China at the moment, given that.

Let's start with capital inventories and cash flow.

I mean from net working capital perspective, if we look historically, we managed to stay below 25% for most of the quarters, both in upturns, but also in downturns. I think in some quarters, we've been above and that's primarily when we had very sudden downturns or drops in the top line. We've then been able to manage that effectively to come down to the 25% again.

Did that answer your question?

And I guess sort of no need to have structurally higher level of inventories to be -- you have a big buffer in the supply chain is just so disrupted in many industrial areas.

I mean part of the inventory buildup that we've seen so far also in the first quarter, for instance, has been to cover for that. Then I mean, looking forward, it's a little bit difficult to predict. I think that depends a lot in terms of what happens with the lockdowns in China, what's happening with the supply chain and logistics challenges. But part of the inventory buildup that we've had is in response to this.

And I don't think we believe structurally mid- to long term, we need more net working capital or inventory. This is more in the current ongoing supply chain disruptions. I think we have a quite good supply chain setup already. I think SMS have a very continent by continent local setup, which I think serves them well. SMR, SRP, more big machines, low volumes, very difficult really to motivate that you distribute that type of assembly operation. There are some examples when we have a product that is popular in India, for example, in tunneling. We can fairly set up a small shop for that, but it's more by exception basis than -- but I think we will do something big in that shifting the supply chain store.

Yes. We have a question from Andreas Koski, Exane.

My question was actually about CapEx. And I'm sorry if I missed your comments about that earlier, but to reach the SEK 140 billion in sales by 2025, will you be able to increase your CapEx levels as well? Or are they going to stay below SEK 5 billion as you have guided for, for '22?

I mean we -- I can only comment on what we have guided for, and it's below SEK 5 billion. I cannot really predict a few years ahead. We have -- we are not really ready to talk about that. But in January, if I look at what are we investing in, it is, of course, maintenance and new buildings, maybe service workshops in SMR is replacing new machines or capacity in SMS. That will, in a way, I guess, scale with growth. We are right now this year, and the reason we raised the CapEx guidance for this year, was actually more driven by digital investments. We have some fairly significant ERP programs that are starting. And we are also doing some more specific CapEx in, for example, SMR towards electric -- to the BEV sort of production and so on. So it might be so that we need to raise the CapEx guidance further out in the outer years, but I don't have a -- it's not the guidance I'm giving now.

Because I assume you will have to build out production capacity to be able to grow the volume growth that you expect. And I guess for this year, the less than SEK 5 billion will correspond to roughly 5% of sales. But you don't think that is a reasonable number to expect also for the coming years when you are growing your sales level, i.e., 5% of sales.

I think yes. I don't think we should expect a big or a major difference in terms of percentage of sales. I agree with that.

All right. No more question, it seems. And then we are reaching soon the end, but we will, before closing, listen to our CEO, Stefan Widing, for some concluding remarks.

Thank you. And I will drop -- not drop any news now towards the end, but the repetition is the mother of knowledge, as some wise person said. So I just want to reinforce that we are executing on our shift to growth strategy. We have enhanced and focused our core business. We are expanding in the value chain. We're expanding our digital offering, and we have embraced sustainability as part of our business models, as I hope you have seen throughout the day. This is also why we have raised our ambitions: a new financial target to grow 7% through the cycle, organic and inorganic; adjusted EBITDA target in the range of 20% to 22% through cycle; debt target of staying below 1.5 net debt over EBITDA; and maintaining our dividend payout ratio of 50%. So we have shown here today that we are continuing to transform Sandvik. We have a really strong platform to build upon through our strengths across the group. We are successful executing on our shift, and that is our ambition, also, going forward. By doing that, we have already started to enhance the growth profile and the resilience of the group. We have raised our targets. We're executing towards 2025, and we're going to do that also with an eye towards building Sandvik stronger also for the long term, towards 2030 and beyond. So thank you for coming and listening. Thanks to all of you that have stayed for so long. I will now invite Louise up, and tell us about the reward.

The reward. Yes, the reward is there. It's drinks. No, but yes. So this concludes our formal Capital Markets Day 2022. For those of you who wanted to stay for the mingle, it's on the second floor, and you will go out here where the ladies are standing. And for everyone, I conclusively thank you all for attending and for good questions, and I hope you have felt that this has been informative and interesting. And thank you again.

Thank you.