Sandvik AB Delivers Record Orders Despite FX Drag

Sandvik AB ((SDVKY)) has held its Q1 earnings call. Read on for the main highlights of the call.

Sandvik AB’s latest earnings call struck a largely upbeat tone, as management highlighted record order intake, robust double‑digit organic growth and improved profitability despite heavy currency headwinds. Investors heard a story of strong demand, better margins and solid cash generation, tempered by pressure in Rock Processing and continued volatility in raw material and FX markets.

Record Orders Signal Strong Demand Cycle

Sandvik reported total order intake of SEK 36.8 billion, the highest in its history and implying a book‑to‑bill ratio of 120%. Orders grew 12% year‑on‑year in total and 23% organically, marking a fourth straight quarter of double‑digit organic order growth and an eighth consecutive quarter of overall order expansion.

Revenue Growth and Margins Edge Higher

Revenues rose to SEK 30.7 billion, up 5% year‑on‑year, with organic revenue growth a solid 15% as the order boom started to translate into sales. Adjusted EBITDA reached just over SEK 6.1 billion, corresponding to a 20.0% margin versus 19.7% a year earlier, lifting adjusted profit for the period to SEK 4.1 billion from SEK 3.8 billion.

Cash Flow Strengthens Balance Sheet

Free operating cash flow came in at SEK 3.6 billion for the quarter, giving a cash conversion of 62% and a 12‑month rolling conversion of 88% despite seasonal softness. Net financial debt fell to SEK 24 billion, or SEK 31 billion including leases and pensions, putting leverage at around 0.8 times 12‑month rolling EBITDA and giving Sandvik room for investment and resilience.

Mining Orders Hit New Highs

Mining demand remained a major engine, with order intake surpassing SEK 19 billion in a single quarter for the first time. Total mining orders increased 11% and organic orders grew 22%, or 26% excluding major orders, while equipment orders jumped 43% organically and aftermarket sales climbed 11%, underscoring broad‑based strength.

Machining Benefits from Demand and Pricing

In Machining, cutting tools orders increased 18% while revenues rose 10% organically, suggesting strong underlying demand and some preordering by customers. EBITA in the division reached SEK 2.8 billion with a margin of 22.9%, up from 21.0%, supported by higher volumes, effective price realization and ongoing cost savings.

Intelligent Manufacturing Shows Stand‑Alone Momentum

The newly reported Intelligent Manufacturing business posted order intake up 6% in reported terms and 11% organically, confirming healthy underlying growth. Profitability remained solid with a 20.7% margin, slightly above last year’s 20.6%, as license and subscription sales increased albeit from a low single‑digit share of the business.

New Products and Deals Enhance Portfolio

Sandvik continued to build its offering with the launch of EverPath, a next‑generation toolpath platform, and two new Rock Processing cone crushers in the 400 and 600 series. The group also closed the acquisitions of ThoroughTec Simulation and K&Y Diamond, broadening its digital capabilities, aftermarket reach and ultraprecision tooling portfolio.

Working Capital Discipline Lifts EPS

Net working capital on a 12‑month rolling basis improved to 28.1%, down 1.7 percentage points year‑on‑year, reflecting better inventory and receivables management. Adjusted EPS rose to SEK 3.27 while the normalized tax rate of roughly 24% remained within management’s guided range after adjustments, supporting earnings visibility.

Currency Drag Weighs on Reported Margins

Significant currency moves were a major drag, diluting group EBITDA margin by around 240 basis points and erasing part of the operational gains. The total reported FX impact was roughly negative SEK 1.4 billion in the quarter, with mining alone taking an SEK 810 million hit, and Sandvik warned of a further SEK 0.5 billion FX headwind in the second quarter based on late‑April rates.

Rock Processing Hit by Mix and Timing

Rock Processing had a weak quarter as EBIT fell to SEK 290 million and margin slipped to 12.0% from 15.1%, with organic revenue flat and volumes down once price is stripped out. Management pointed to delayed deliveries and a negative product mix, as missed shipments included higher‑margin items, while FX and lower volumes combined to create negative operating leverage.

Mining Margins Squeezed by FX

Despite strong volumes and an operating leverage of 38%, mining’s adjusted EBITDA margin declined to 19.8% from 20.8%, leaving earnings roughly flat year‑on‑year at around SEK 3 billion. The deterioration was largely traced to the SEK 810 million currency headwind, estimated to have cut the margin by about 310 basis points and overshadowing the benefits of scale.

Tungsten Volatility and Supply Risk

Surging tungsten prices and supply constraints stirred volatility in powder and cutting tools, with Sandvik highlighting a roughly three‑month lag in powder pricing and an additional six‑month lag for tools as inventory works through. Management noted that some smaller rivals are facing supply issues, raising questions over how sustainable today’s elevated demand and prices will be once raw material markets normalize.

Inventory Build from Growth Ramp‑Up

While year‑on‑year net working capital ratios improved, Sandvik acknowledged a sequential buildup in the first quarter as it ramped for growth and absorbed higher tungsten prices, weighing on near‑term cash flow in what is usually a seasonally weak cash quarter. The company framed the inventory increase as a necessary support for strong order momentum rather than a structural deterioration in balance sheet discipline.

Restructuring Costs Hit Intelligent Manufacturing Margins

Intelligent Manufacturing’s otherwise solid margin was temporarily reduced by a restructuring charge of around 100 basis points, which management did not classify as an item affecting comparability. The company expects the restructuring to pay back within the year, suggesting the short‑term hit to profitability should be offset by efficiency gains and better positioning for future growth.

Guidance: Stable Outlook with FX Caveat

Management kept full‑year guidance intact for capital expenditure, net interest and tax rate, reiterating the group’s margin corridor after delivering an adjusted EBITDA margin of 20% in the quarter. They signaled continued focus on cash and deleveraging, highlighted the record order backlog and book‑to‑bill of 120%, and expressed confidence in a margin recovery in Rock Processing as delayed deliveries are executed, while cautioning that FX will remain a notable headwind in the near term.

Sandvik’s earnings call painted a picture of a company riding a robust industrial upcycle, with record orders, healthy margins and a strengthening balance sheet outweighing the drag from FX and pockets of operational weakness. For investors, the key takeaway is that demand in mining and machining remains strong, the group’s margin framework is intact and management is leaning on cash discipline, even as currency and raw material swings keep short‑term volatility elevated.