Glad to see you all here. Welcome to Tübingen. Welcome to Walter. It's a great pleasure to be here in Tübingen and be at just Walter, one of our really successful brands within the group, and Mirko being the President for Walter, a very successful leader within Sandvik. As I said, I'm really glad that so many of you have taken the time, we know your time is precious, to come here and look a little bit, not at where we normally go to Sandviken, but look into some of our exciting assets outside Sweden. Walter is one of our four brands within SMS, as you all know, where all the brands are doing very well. I just want to tell you a little story. I travel a lot in the world. I visit many of our operations.
I think it was about half a year ago, I was in India. At that time, I put on my Coromant hat. Sorry, Mirko, at that time. Anyway, we visited GE, where Coromant has a global agreement with, which means that Coromant is actually supporting all the factories around the world. You who follow also GE have seen that there's been a lot of insourcing during Immelt's time at GE. It's a lot of fabrication everywhere. We had a great meeting, and they have a huge factory down in India, actually in the Chakan region outside Pune. We were sitting in the meeting and the guys, actually even the President for GE in whole India, came to the factory at that day, just to host my visit. They said, "Yeah, we are very happy with Coromant's way of supporting us around the world.
In this factory here, you represent about 70% of the business. Guys, watch out. There is another company that is really developing fast and taking market share on you now, and that company is Walter," he said. I said inside myself, "I think I can live with that." Anyway, this shows a little bit the strength of the businesses that we are in. It is now one and a half year ago we met since last time, and that was in Sandviken. At that time, we presented the strategy, but also the financial targets for the group. A lot of things has happened since then. We have a lot of changes in the group, and it has been a tough time for many people in the group. I'm really proud of the organization.
Because they have not just accepted the changes we have taken, but also embraced it in a very positive way. It is a strong Sandvik. What have we done? Starting up, we have completed the decentralization. We have also put in a new performance management systems. These are the so-called famous scorecards, mainly I think many of you heard. I would like to give a lot of credit to Tomas and his team, who has actually made life much easier for me and my colleagues traveling around the world, but also our own business to really understand what the performance is in our different businesses. For me, it's crucial. We have completed more or less the optimization program that we have done with all our factories. We're getting closer to the finish on that project.
There is also a lot of initiatives from all our product areas and business units around the world to drive efficiency. We have cleaned up out of our portfolio. We have made the changes in our portfolio strategy, and we are getting closer to that. We will be ready in the middle of next year and completed with that. Last not least, maybe you remember me, I said that time, I was at that time dreaming that Sandvik would reach the level of 15% EBIT margin. I said a quality company delivers 15% EBIT margin. One and a half year later, we have surpassed 15% and are today close to 16%. I think they've done a great job. Strong balance sheet gives striking power.
During this one and a half year or two years, we have managed to take down the gearing from 1.2 to 1.6, where we have a target level of 0.8. This gives us the opportunities that we need. If we continue in this pace as we are doing now, including the divestments that we are doing, we can see that Sandvik will be debt-free by the beginning of 2019. Third, not least, that is we are investing in the future already today. Give you a couple examples. We have started the new PA for additive manufacturing, and we are actually employing young talented people in a high pace. We have made a number of acquisitions within the software part within the group. Comara is one of the one which was actually done by Mirko here in Walter.
We have Prometec, we have Viber 9, which is another software company from Silicon Valley. We have created an embryo foundation for building our software part of the business. We are developing our powder technology, and we are moving into the powder of titanium. There are more things, exciting things that we're doing. We will hear a lot today, not least from Mining and Rock Technology, because we're talking about automation, we're talking about platforms connecting us with the customers. In the end, we have to deliver shareholder value. I think some of you recognize this picture. For myself, it's my way of looking at Sandvik. Sandvik is not one company. From my perspective, Sandvik is 32 different entities, operating entities with full P&L responsibility. This is important. When I look at this picture, I see the Sandvik companies.
The size of the bubbles actually represents the size of the product area or business unit. The x-axis represents the profit, which is done in millions of Swedish krona. On the y-axis, we actually see the profit margin. Looking at this one, and maybe some of you remember the one I showed last time. The big difference from this, besides that most of these bubbles have moved up in this direction, is that at that time, we had seven businesses that was actually underperforming with a below zero result. Today, we have no businesses delivering zero result, even though we have a bubble here on zero, and some of you might recall which PA it is. I will not say it today. Sustainability is important for Sandvik and in our way forward. When we look at sustainability, we look at it from two perspectives.
One is how we can support our customers to become more productive, sustainable. The other one is how do we develop our own operation to become more sustainable. Besides supporting our customers when it comes to sustainability, for us, it's also important that all the employees in Sandvik feel proud of the company. It's also important that you investors see Sandvik as a sustainable investment going forward. We are proud that also this second year in a row, we have managed to be part of the Dow Jones Sustainability Index. We were actually better than 97% of all the companies that were audited. I think this is a small sign that we take this serious and that we are moving in the right direction. Moving forward. The mega trends in the world, I think we all know them.
It's about urbanization, it's about large cities become bigger, it's about lifting standards of living in all the world. That puts demand on infrastructure, but also on energy supply. At the same time, we have a lot of environmental challenges, but we also have a lot of opportunities, and connectivity is one of these, which actually can enable us to help us to become more productive and more efficient in everything we do. These are up here. If we channel these down and look at the trends that is actually affecting Sandvik. One of these area is material evolution. I think this material evolution is affecting all three of our business areas. Increased infrastructure, new technologies, puts a lot of demands on commodities.
Our mining guys say here, "Yes, that's good." We have to dig deeper today to actually catch the same amount of minerals for the same demand that we have today. This calls for automation. In the future, our customers, the mining company has to be more efficient to be able to deliver that. Connectivity is also important for all our businesses. If we look at SMS, this is an enabler for us, for not just being a hardware supplier. The environmental challenges, it's actually driving the electrification on everything. From our perspective, this can be both challenging as well as an opportunity. Electric cars, yes, it's a challenge for us. On the hybrid side, on the other hand, there is an opportunity because you have to cut more. When we look at the mining business, we look with this electrification.
Yes, we have electric loaders, electric trucks, and electric drill rigs. This is an opportunity going forward. The last is new manufacturing technologies. We have the five-axis cutting machines giving opportunities for the future, but we have also the additive manufacturing where we have just moved into From my perspective is that Sandvik stands strong. We are well-prepared to meet these challenges. Sandvik is a global, well-recognized player when it comes to material technology, but we have also deep knowledge when it comes to applications of all our customers around the world. We are a player, a world leader when it comes to mining equipment, especially in underground. We are market leaders in the majority of our 32 businesses that we are operating. Our balance sheet is stronger today, gives a lot of opportunities.
Being a market leader within our segments gives also opportunities when it comes to new product development, because we invest more money than our competitors in new product development. I hope you will see that a little bit during the day, a lot of exciting stuff coming. Of course, the sustainability, it is core in everything we do. Looking forward, new technologies, this is exciting. We look at technologies and new products, and the objective for this is what we heard Mirko say before, it is actually driving the productivity of our customers, and in that way, be able to charge higher revenues than other players in the market. When we talk about productivity and trying to see the price is secondary and the productivity is important, just tell you a story.
Some of you have already heard this story, and that's actually a good friend of mine, Alrik Danielson. Some of you know him. He's the CEO of SKF. He called me one day and said, "We need to have lunch, Björn." "Of course, you are a good friend, but you are also a good customer to us." We had lunch and he said, "Yeah, Björn, I think we are not fully satisfied with what Coromant," because Coromant has a contract with SKF. "We're not fully satisfied with what you're doing here with us. You need to shapen up." I said, "Okay, you are an important customer. You buy for SEK 80 million every year from us, so you are very important to us. I need to go and talk to Claes." Claes is here also. I called Claes, but that time he was head of Coromant.
I said, "Claes, what the hell are you doing? What are you doing? Are you not supporting one of our most important customers?" He says, "Yes, we are doing what we can, but maybe he did not tell you that they have just sent us a letter that you need to reduce your price with 20% on all your products." Claes, he's a good soldier, so he said, "If you want me to lower the price with 20%, I'll do it." I said, "No, do what you normally do best, because that's what you do." What did they do? Yes, they went in in the normal way with the whole team. They have so-called performance sheets. It's about improving the productivity during the next two years. I think it was a 15% cost decrease in the cutting process in SKF's factories.
Then I met Alrik on a meeting. He came over to me and said, "I don't know about this, Sandvik, but you lifted the price with us and you still have all the business." Proves a little bit that it is about productivity and not about price. This is just a small appetizer of what you're going to see from the mining guys later on. This is the first drill rig, which is actually driven by batteries. It's a great product. A lot of opportunities going forward. SMT. SMT is underperforming today. I think you're all aware of that. This actually started already 2014 when the oil price fell. Since that time, we have had a sliding revenues orders, which has also affected our EBIT margin.
We can see now that the order size is moving upwards, and there is a lot of actions being taken to improve the performance. Göran will talk more about that together with Micke. That will come up. When you look at SMT, it is important to see that not all the parts of SMT are underperforming. We have a lot of good business. We have Tube Special, we have Kanthal, we have Powder, which are doing well. And then it boils down to what we have said many times. It is the core and standard part of the SMT business, and also part of the strip business. And we will come back to that. And Göran and his team will go back and tell them a little bit what kind of actions are we doing.
Then we come to the magic question that I know many of you are asking for. What is going to happen with SMT? Is it in or out? What I say then, whether it is in or out in Sandvik, we first have to clean up the company. We have to make sure that SMT is delivering 10% EBIT margin. Then we might think about what we will do with this business. Now on, it is focus on performance improvement. What have we done? Sure, we have a new decentralized structure, which we talked about. We have a new management, Göran, he will present himself there, and we have a cost-efficient program that is being taken place. The next step, it is more about portfolio trimming. What is going to be the future? What are the opportunities in the market for the SMT business?
We will come back to that a little bit further on. I mentioned the portfolio management. Yes, we have four companies that we have been divesting or that we are divesting, and we are coming closer to an end. We expect to do the closing of the SPS by the end of this year, and we expect to do the signing of the contract with Hyperion before the end of the year, and the closing before the half year. Then we have the mining systems, we have the wire business, and we have the Hyperion and SPS out of the business. That business represents approximately 10% of the group's revenue and 4% of the EBIT margin. This will give a cash injection to the group of approximately SEK 10 billion, which will strengthen our balance sheet. Moving forward, we are talking about acquisitions. We need to grow forward.
What do we think about when we are talking about acquisitions? Yes, number one, the acquisitions are driven by our product areas. It is our PAs and business units that drive the acquisition. And they, each acquisition, need to strengthen the strategic direction of being number one or number two in the different businesses. We are interested to do business both in the core business as well in adjacent technologies. We know that the adjacent technologies have a much higher multiple, and we do accept that. That is why we are focusing on small to medium-size companies to grow in. Because in the long term, we want to safeguard our credit rating for the group. Going forward, we say stability, profitability, growth. First year, housekeeping, second year, improving the profitability, and now third year, it is moving in the acquisition direction.
When we talk about acquisitions now in Sandvik, we talk about four different, not acquisitions or growth, we talk about four areas. Three that we can control and one that we cannot control. The number 4 is actually the market development. We have now seen a little bit more than one year a strong market development which this represent, which it has grown the group quite significantly lately. The more sustainable growth of the business, that is more related to three different areas. The first one is the organic growth, and that's the everyday work from the so-called product areas and business units. It means developing new products, new technologies, and win orders and market share in the market. This is the most profitable way to grow forward.
Another exciting area which is coming, that is, of course, the digitalization, new adjacent technologies where we are investing into today. These are the growth areas of tomorrow. We have a number of projects that you will listen to with the guys coming on after me. The third part is, of course, the M&A acquisitions. Here we say both in core business as well as in adjacent company, that's where the focus will be coming forward. This will mainly be done by the PAs that are delivering profitable and stable businesses. Just to summarize a little bit all the priorities we have in our three businesses. When it comes to SMS, which is clearly the star performance in everything they do, here we have a stable, profitable product areas. We focus on growth. We would very much like to see SMS grow forward.
Feel the pressure. Klas answers. Second thing, Sandvik Mining and Rock Technology. Also here, we're seeing a great development lately. Stability, we have the new structure in place, and the profitability has come up to over 16%. How do we grow that forward? Yes, of course, if there comes up some interesting acquisitions, but there are a limited amount of exciting acquisitions within this phase. There are growth opportunities, and these are mainly coming from the after market that is moving well today and the automation. I think we never seen as much interest from our mining customers around the world around automation as we are seeing today. SMT, priority number 1, fix, make sure that the business delivers its 10% margin.
Of course, we can see some growth opportunities, and that's mainly in the business from Kanthal and in powder, where we are today performing well and the businesses are growing. In the other two businesses, strong focus on getting the house in order. For the group, yes, we are talking about capital and cost efficiency to make sure that our head office is lean and mean going forward. I will now hand over the stage to Tomas before you have the opportunity to listen to our operating entities that will give you a little bit of an in-depth of what I've been talking about today. Thank you very much.
Thank you, Björn. We're now going to look at scorecards for 20 minutes. Well, not really. Good afternoon, everybody. What we'll do now is we're going to have a financial run through of the performance of the company. I'm going to connect back to where we were on the previous capital markets day in Q1 2016. I'm going to talk about what's happened up until now, where are we now, and then talk a little bit about the future. Not too much, but a little bit. We'll use the income statement and the balance sheet as a vehicle for this. I'm going to do some deep dives, in some familiar areas and also in some areas we haven't talked so much about with you previously. Let's start with the top line.
You have the revenues on the left-hand side and the organic growth on the right-hand side. If you look at the revenues, Q1 2016 was quite challenging. We described the situation as challenging market conditions. The top line had gone down with more than 10% of the last couple of years, and we set out to improve the profitability and the return in a flattish market environment. Since that, as you all know, the market has come back. Order intake, of course, late 2016, revenues positive as from the start of 2017 with pretty good numbers. If you look then at the gross margin, going back to Q1 2016, again, we were quite proud that we had defended the gross margin despite we had lost more than 10% of the top line.
Now as revenue started to come back and growth came back, the gross margin is improving, as you can see, quite dramatically. There are still more things to do. It doesn't stop here. We still have some supply chain consolidation to do, price management, of course, as always, and productivity. I'll now go into three areas here, which has an impact on the gross margin. First, a bit on raw materials, which we haven't talked so much about that, but we thought we would give you just an insight in the raw material impact on our cost in the gross profit. If you look at the middle of this pretty busy slide, you can see the circles here, with the orange section. That is the raw material part as a percentage of revenues for each of the business areas, SMS, SMT, and SMRT.
You can see in SMS that the raw material component, which is mainly tungsten or wolfram, is pretty small. Also half of what we produce or source, we actually sell externally to the market. We use half of it. We have kind of a natural hedge in this as well. On the SMT side, raw material, of course, has a larger impact as a percentage of sales, but one-third is hedged. 40% we have alloy surcharges for, and the rest is, of course, exposed. As you can see on the value bar, it's mainly nickel, but nickel is quick. It's fast. It comes and goes. SMRT at the bottom does not have any pure raw material exposure. There's an indirect exposure of steel, of course, but that's always subject to negotiations, of course, with the suppliers.
The second thing I would like to show is the currency exposure. There's always a lot of talk about currency, especially now when the krona is weakening again. This is the transactional currency flows. It's around SEK 15 billion net in foreign currency transactional exposure expressed in Swedish krona. You can see that the major currency is U.S. dollars here, of course. A lot of the mining markets are priced in U.S. dollars. They pay in U.S. dollars, of course. Sandvik has a huge, I should say big, manufacturing base in Sweden and a pretty big one in Finland as well. We manufacture predominantly in euros and in SEK, but we have 90% of the sales outside of Sweden or the Nordic region, really. The third thing I would like to show is the productivity curves. We have talked about it.
We haven't shown it, but this is what it looks like. If you go back to 2016, you can see that all the productivity numbers basically were flattish to negative. We measure productivity in a very simple way. We measure just sales per employee, permanent and temporary employees. You might think it's a simple way to do it, but at the end of the day, when you move employees, you get cost down over time. If you drive sales per employee long term, it actually works. More revenues, less cost, and that's a good equation. You can see here that for the group and for all the business areas except SMT, we are now in positive territory. The target is, of course, 3%. Meaning that if sales goes up 10%, we need the productivity to be 3%.
If sales goes down with 10%, we need productivity to be even more. Now move over to SG&A, going back again to Q1 2016. We said that 100% of the EBIT margin dilution was due to the under-absorption of SG&A, or I should rather say our inability to adjust SG&A as we lost more than 10% of the top line. You can see how it went up and peaked at 26.5%. We said our goal is to come back to where we started, and it does come back now. We're soon at the same level in percentage as we were when they started. Admin cost is going down. R&D, which is the small part, 3%, 4%, is going up a bit. That's a deliberate or discrete decision. Sales is going up, of course, as deliveries are increasing quite dramatically.
We're shipping to the customers and sales expenses and sales driving expenses. There is more to do here as well. I would say that we are kind of approaching the territory now where we should be, regardless if the business is up or down. Now, all of this top line, gross margin, and SG&A, of course, ends up with the EBIT margin. As Björn mentioned here, in Q1 2016, we said a bit boldly that a quality company starts at 15% EBIT margin. We were a bit lower then, sort of 12-ish. We are now on 15.9% at Q3. What is important here to state is that our ambition is to continue to work with small improvements, structural efficiencies, day by day, week by week, month by month, quarter by quarter, year after year, small, steady improvements.
We don't want to put ourselves in a situation where you have to do enormous restructuring charges, take off a couple of billion or SEK 3 billion or SEK 4 billion or something like that, and then start a big program. It's much better if you do it every day, every month, every year, going forward. Okay. Now, a bit below then the EBIT margin, the finance net. We haven't talked about that at all really with you. We are doing a lot of things here. The finance net is or was, I should say, around SEK 2 billion annually, where of the interest net, the biggest part was SEK 1.6 billion-SEK 1.7 billion. It's now coming down quite rapidly. What you see here in the chart is the interest net. Going back two years, SEK 400 million every quarter. That is now coming down to SEK 200 million.
It's being cut in half, which means that the interest rate will go from somewhere SEK 1.6 billion, SEK 1.7 billion down to SEK 800 million annually. The total finance net will then come down to just about SEK 1 billion on an annual basis. What we're doing here is that we are recapitalizing a big portion of our subsidiaries out in the world where we've had a big chunk of extremely expensive local debt in various countries. We have SEK 40 billion in equity in the group, so we're shifting around about SEK 10 billion, and we recapitalize the subsidiaries. That combined with the debt reduction that Björn has talked about and that I will show in just a couple of slides here, will cut the interest net in half. How important is that?
Well, it is important because this means around 70-75 post-tax impact on earnings per share, and that's quite a bit if you think about Sandvik having like five, six krona in earnings per share. It's amazing how much you can do by just restructuring your subsidiary financing. Right. Okay. Talking about earnings per share, this is where we are. We did SEK 5.48 last year, and for four quarters, 12 months. We have reached now SEK 5.70 after nine months. It is improving, of course, operationally improving, but also with the help of a reduced finance net as well. Over to the balance sheet. Working capital on the right-hand side continues to go down. Of course, it's not as quick in 2017 as it was in 2016 because we have strong growth now, and strong growth eats up capital. That's just how it is.
Cash flow is still good. Cash conversion is good. We just have to try to keep it as close as we can to 100%, but it will eat up a bit when you grow. Of course, if you would sort of go the other way, you will have a huge release of cash. I was going to say not end of story, but the P&L and the balance sheet, of course, and the cash flow, what kind of net debt do we get? You heard from Björn here, the net debt is now down to SEK 25 billion. It peaked at actually SEK 40 billion in 2014. The gearing is down to 0.6 or 0.62 to be exact. On the right-hand side, you can see net debt to EBITDA. We were up on, well, 3 in 2014. We are now down to 1.5.
We often get the question, what kind of firepower do you have? We never answer that question because we don't have any real official targets on net debt, EBITDA, et cetera. Depends on what you're going to buy. If I sort of connect with the discussion on Sandvik in a net cash position, let's say you have SEK 25 billion in net debt right now. Let's just pick a number here that we get SEK 10 billion for all the businesses that we're selling, then we're down to SEK 15 billion. Assume then that we, let's say, pound down operationally the debt with SEK 6 billion-SEK 7 billion every year, that gives you a net cash position in 2019. Okay? Just assuming hypothetically. Assume that we have an EBITDA in that point in time of maybe something around SEK 20 billion or whatever. That gives you a firepower of SEK 40 billion.
That's theoretically. That's the range. That's somewhere between those numbers from maybe SEK 20 billion up to maybe SEK 40 billion in two years, but that's two years from now. Okay. Let's move on to then return. On the right-hand side, you can see the return on capital employed. We are now on 18%, and the target for us is to reach 17% by the end of 2018. We have good hopes to reach that. We have the target in sight. On the left-hand side, you see the combination of EBIT margin and the capital turnover. Of course, we started this improvement of return on capital employed with just margin expansion in EBIT. As you can see in the chart, last three quarters, we have seen a very healthy improvement of turnover as well.
We now have a combination of increased capital turnover and increased margin that drives return on capital employed. I think I'm coming to the last slide. No, last but one slide, capital allocation. We will continue, as we have for some time, to allocate capital to debt reduction, to dividend, to M&A. Of course, we are conscious of our credit rating. It's very important for us. It is important to continue to reduce debt and, of course, to maintain the dividend policy. We believe that reducing debt, maintaining the dividend policy will still give headroom for quite some increase in M&A going forward. The balance sheet is strong and getting stronger. If you look at the right-hand side, what will impact the cash flow in the near future? Well, working capital, we are growing. It'll have some negative impact on the cash flow.
Net financial items, on the other hand, will have a positive impact going forward. Tax, we will believe be flattish, 27%, around that number, or 26%-28% as the official guidance is going forward. CapEx, basically the same level as we have now, between SEK three and a half billion and SEK four billion. Now we have the last slide, here a little bit about our financial targets. As you know, we have four financial targets. We have return on capital employed. I talked about that. We aim to reach 17%, but we are on 18% today, we'll reach that most likely. We have the gearing below 0.8. We are at 0.62 today. We have the dividend policy to have 50% payout ratio. We can do that, no problems at all. We have maybe the most interesting one, and that is earnings.
We have a fixed earnings growth target for this period, 2016, 2017, and 2018. It's 7% on average for these three years. That means in money, which you maybe can see on the right-hand side, that means SEK 2.3 billion. If you look at the left-hand side, we have reached SEK 2.7 billion right now after seven quarters out of the 12 quarters, which is in the period. As I started here, what we assumed has not happened. We assumed a flattish top-line development, and we said SEK 2.3 billion, not market-driven, all non-market-driven, self-help, so to say. Now we have help from the market, but we still have efficiencies kicking in, etc. We have supply chain optimization. We have productivity, etc., etc., but the market-driven improvement is just as big or even a little bit bigger.
This is just an approximation, no exact numbers, but this is how we see it. Anyway, we're not going to give you a new number today. You have to do the math yourself. You have to do your own assumptions. Given these numbers, we aim to reach SEK 2.3 billion in improvement at the end of next year, and we have reached SEK 2.7 billion already now. Well, I can say that we have no plans to go backwards next year.
Good afternoon. It's a real pleasure for me to talk and present Sandvik Machining Solutions. My name is Klas Forsström, and during the presentation, we will cover an introduction about myself and Fredrik Vejgården, our Head of Strategy & Business Development, with an extensive background from manufacturing and strategy implementation as well. It also will be about our current performance and a little bit about the background. It's not the last quarter three that is important, but what has made that happen. Moving forward, we will talk about key market trends and what we are doing, aiming for, I'll summarize it all. Here, Fredrik and myself will share presentations. My background, very briefly, 25 years within the business, so to speak. Last job was heading up Sandvik Coromant, the largest PA division within Sandvik Machining Solutions then.
Fredrik, as I introduced earlier, you will meet and learn more about Fredrik later on. To start with, what is Sandvik Machining Solutions? It consists of many different PAs, and four of those PAs are driven towards the end-user markets. It is driving application knowledge, product performance, and customer excellence at the end towards the market. Three of those are positioned in the premium market. It is Sandvik Coromant, Walter, and Seco. I'm so happy to be here and see what Mirko and his team has done with this facility. We have Dormer Pramet, targeted the mid-market, a more price sensitive type of market, and building their success around that. Cutting across, we have a supply product area. It's called powder and blanks technology.
It delivers powder, i.e., the ingredients for the inserts that we manufacture, rod blanks for the round tools, also is a vital part in our recycling efforts. You may have heard that if we sell 100 kilos of hard metal, we recycle roughly 50% of that into our own facility. Looking towards the future, we have also additive manufacturing and digital, and this we will talk more about later on. Drilling in a little bit deeper into it, what type of products do we talk about? Of course, we have the inserts, the consumables, the pulse of the manufacturing industry, so to speak, but also round tools, growing in importance, coming stronger and stronger. I will talk a little bit more about round tools later on.
More investment driven, if we can talk about investment driven tools within our industry, tool holders and tooling systems. At the bottom then, supporting us with powder and then the early stages of business within the two other areas. The industries we serve, the industry segments, is automotive. It's the largest part. It consists then, of course, of engine and transmissions and all the components there is. Aerospace, a sector, a segment that has been growing quite substantially over the years, and that we have taken great market shares towards. Oil and gas, roughly 9%, general engineering, the large, the rest. In general engineering, of course, you have many different sub-segments. If I would like to highlight a few, it is medical as one example. Another one is small part machining, i.e., tiny, small components.
The third one would be electronics, computers, and cell phones. We are a Northern Hemisphere type of company, i.e., where manufacturing is, there we are present, i.e., it's in Europe, 55% of our turnover. It's 20% each, so to speak, on the other sides, and then we have 4% below, and the majority of that is in South America. We are close to our customers. We have more than 100,000 customers that we constantly serve. Some 85% of our product assortment is standards, consumables or stock standards, and 15% of what we sell is more customer driven, custom tooling. 60% of what we sell go through direct channels and 40% through distribution. Depending on market, it varies quite a lot. In North America, of course, a distribution driven market, much more distribution than compared to Europe.
I think also the last area, up to 70% of our sales goes through electronic means, web or other type of electronic transactional setup. Here we have increased substantially over the last couple of years. Before I move into the current performance, what I'm trying to say here, that is we have a strong footprint, we are close to our customers, we are selling on value, and we are driven customer productivity. That is what we are. I think you know more about the details of the quarter three, and I will talk about quarter three and then go back a little bit and talk about what was driving that then, because it was not only that quarter that gave it, of course. It was a strong underlying growth. It was starting in China, improving in Europe, and coming back over in North America.
It was also quite substantial margin and earnings and margin improvements. One area that I'm very, very pleased with, that is our record low net working capital. Also in other areas with the improvement programs, of course also influenced by the sales as such. Going back a little bit then, I think this is a fairly interesting slide or couple of slides, and it links in quite a lot to what Tomas showed earlier. We started to improve in returns close to two years ago. We continued with EBIT margin improvements over the last couple of quarters. It was supported by improved capital improvements. I think the most important thing is not the numbers, it is what is behind the numbers.
If I start with the cost and productivity point of view, over the last three years, when the business was down, since then, we have taken out 10% of FTEs. It's through efficiency programs, through consolidations, and different type of activities. We have also, due to better stock control, improved forecasting, et cetera, been able to decrease our net working capital, not only in stock, but also in all the other areas when it comes to payables with five points. If you would have asked me three years ago, I would have said that could not perhaps happen. We have shown that we were able to do that. To top it off, the last year, as Tomas said, we have started to move up in revenue as well. All in all, that is the explanation behind.
My point here is it's a strong, committed journey over a couple of years and accelerated during the last couple of quarters. What is my summary here then? I think we have started to turn around how we do business, and later on when I come into the future, you will see that operational efficiency as one area is very important moving forward as well. This graph, I think all of you have seen in many different variations. My main point with this graph that is, we don't plan that it will be early 2000 type of cycle anymore. We plan for a market that is slowly but steadily going up, sometimes more rapidly and sometimes a little bit more soft. That is what we have seen the last few years.
At core of what we deliver and the essence of the value of Sandvik Machining Solutions, that is this metal cutting. It's the knowledge, it's the applications, it's the connections with the customers. Not only in existing production, but also in new projects. We are working very close to customer, and this competence and this knowledge within machining, we are fairly convinced that we can expand that into other areas. We can expand it into, it's a clear trend, and we see a lot of value when it comes to verifications and evaluation, i.e. metrology. More and more metrology is coming in line and in machine. When it comes to preparation, preparations about equipping machines and putting cutting tool data early in the process, that is our home turf. We can move into that.
When it comes to design planning, et cetera, if the right tool is already and the right application is already chosen when you design something, it's fantastic gains to be driven from an end user's perspective. We believe that we can expand that. More about that will come later on. I will divide this now into two different eyes, two different glasses. One glass eyes, pair of eyes will talk about core and some trends within core. Also how we are developing our strategy there. Later on there, Fredrik Vejgården will come up and talk about adjacent areas, what trends we see there, and how we are going to develop that. We will tie it together at the end. If I start with round tools, gaining share. A lot of things are happening when you manufacture.
It's more net shape, it could be additive, or it could be different ways of producing tools. It's also machines, higher velocity, higher accuracy, et cetera, that drives the development of the need of round tools. What is great here, we are really progressing here, and we'll come back to that as well. Electric vehicles, I think everyone talks about that, and you heard Björn mention it a little bit. If I try to gather numbers here, it's difficult to understand if it is some says within five to eight years, 4%-7%, perhaps of the total manufacturing will be electrified, battery driven cars. Others says a little bit less, and some others says a little bit more. What I'm very convinced on about that is that in between it will also be hybrids. Hybrids is a fantastic opportunity for us.
It is in between 20%-25% more machining done on a hybrid vehicle compared to a combustion driven vehicle because you have the two parts, if I simplify. Medium term, it is better for us. Another area that is increasing in demand, I think those of you that have followed us over many years knows that material development is playing in our hands. I take aerospace as an example. Over the years, titanium, composites, that type of material in order to save weight has increased. Aerospace is very often starting the trend, it moves into automotive and other areas. What we know, this is trickier materials to machine, we are experts on those. Strategic direction. First of all, new product launches.
I have to say, I've been in this industry for 25 years, and sometimes I think that people believe what more is there to invent. Can it be anything more? The Tiger·tec up there, it's a coating of an insert that generates quite substantial customer gains. New innovation in core. Even more fascinating, if you move down to the lower corner, a drill. By design, by look, looks like everyone else, but it generates substantial productivity for the customer. In the upper right corner, the CoroMill lightweight. Fredrik will talk more about that. Using additive manufacturing to produce that in-house i.e., we are part of the industry we serve. 35%-45% of our COGS is exactly the same type of COGS that our customers, metal cutting. All the improvements we are doing to our customer, we can use also in-house.
Perhaps the most exciting of them all, using new programming techniques in order to machine in a more efficient and productive way. The Y-axis parting or the CoroTurn Prime. Not only new tools, but also new programming technology. We can earn money on the tools, and we can earn money on the programming technology. Coming back then to are we an industry with not enough innovation? We have a lot of innovation and inventions to make in the range of 30% up to sometimes 300% of productivity gains for our customers. I love this industry. Another area, that is increased services and customized offerings. You are sitting in one of those centers.
Each and every week, each and every day, Mirko Merlo and his team are meeting customers that they are trying to solve their problems, and generating opportunities for them, and generate sales opportunities for us. More and more of this is also moving into a digitalized world. I.e, nowadays, you get advices on how to cut, how to machine, how to buy, et cetera, on your different platforms. This is gluing together. The core is the competence and the knowledge, and that we have. Round tools, once again, I look upon this as a fantastic opportunity. First of all, the development of market is moving in that way. Secondly, we have a lower market share than in other areas. It's opportunity to grow. We can do it organically, and we can do it also if we find a good enough M&A target as well.
I know that those of you that have followed us over the years, you have heard the story that round tools is not that profitable as inserts. In the high premium area, we can generate a very good profit. Operational excellence. I think we have injected Sandvik Machining Solutions and all the individual PAs with this type of new DNA. We can always do it a little bit better. It could be small steps each and every day, and sometimes when needed, we take a little bit of a larger step. We do a consolidation project, et cetera. This we will continue to do whether the market goes up, or it's flat, or it's down. It's a change that has happened, and I'm so pleased to see this.
My summary while inviting Fredrik up here, that is we are driving core in an increasingly accelerated pace, and it's paying off. Please, Fredrik.
Thank you, Klas. I'm Fredrik Vejgården, Head of Strategy and Business Development for SMS. I have had this role for a couple of years now. I get to talk about the really interesting stuff today, in my view, which is great. I'll share a bit about how we see the market trends and strategic direction for SMS in the field of additive, but also digital manufacturing. Starting at looking at some of the market trends. This is historically how we have seen the manufacturing process. Very much divided into discrete process steps with systems and softwares very much linked to these process steps. Ourselves, competitors, and other players in industry also identify themselves within these processes. For us, that has meant identifying us with machining, as you heard Klas talk about, as a tooling supplier, a business worth approximately SEK 160 billion.
This world is changing, and it's driven by the introduction of digital technologies. What's driving that? Well, I think you can all relate to how these are changing the everyday life for us as private individuals. The way we look at information gathering, the way we interact with the world around us, the way we consume services. We see a clear trend that that expectation and that behavior is being brought from the private life into the work environment. We also see the introduction of mass connectivity, the Internet of Things, that gives rise of enormous amounts of data. That combined with increased computing power, improved data security, is enabling a whole new level of digital services in industry.
Clearly, we believe this is going to change the way we look at manufacturing going forward, it's also going to create enormous opportunities for value creation for companies like us, but also for our customers. Another trend that's sort of hard to miss these days is the trend of additive manufacturing. You all know that the growth prospects of this technology is tremendous. In our view, it's one of the most interesting sort of up-and-coming future manufacturing technologies. Customers today ask for lightweight materials, the ability to create new product designs. They want to reduce waste. They want to minimize their environmental footprint. Additive technologies can help customers with all of those things. That said, we need to remember that additive is a very young technology.
Only in the last couple of years, we've seen the shift from it being used as the R&D and prototyping tool to actually become a manufacturing tool. Only in this year, we actually see an acceleration of that trend in specific industries, such as medical and aerospace. It is important, however, to recognize that not all components are suitable for additive manufacturing. For it to be relevant, it needs to fulfill very specific criteria, be it expensive materials, complex designs, cases where you want to get rid of subassemblies and actually have one complete part. In those areas, additive could be fantastic. When you look at all the components that are being produced in the world today, experts and industry peers that we talk to estimate that the share of components is actually very small.
Probably around 1% of all components in the world will actually be relevant for additive. It's not like it's going to turn the entire industry upside down. That said, looking at the growth prospects, again, it was a SEK 2 billion industry in 2016. It's estimated to be a SEK 5 billion industry by 2020 and exceed SEK 10 billion in 2025. So fantastic opportunities. One of the key questions for us has, of course, been: What is this going to do to the metal cutting industry? As you can probably understand from my previous descriptions, we see it much more as an opportunity rather than a threat. Yes, it will take away some of the metal cutting in the world, but the upside is believed to be much greater than that. Moving from the market trends into the strategic direction and what we want to do.
Starting with digital, I want to kick us off by showing a short film.
This is where we belong. The world leader in cutting tools. The innovator on an endless pursuit of higher precision, higher quality, higher speed. The productivity expert in the sufficient chain from A to Z, we call the manufacturing process seamless, flawless, lean. Right? In fact, this process has significant room for improvement. Islands of disconnected players and fragmented systems, manual procedures, unnecessary steps, waste. But what happens when CAD models can be optimized based on machine data? When CAM systems can foresee production costs? When machining strategies can be improved by data from metrology and cutting tools in real time across the globe? Gaps close, new shortcuts emerge, things start to move. For us, new competitors, new challenges, new possibilities, and the shift has only just begun.
It's time for us to start connecting the dots in this new ecosystem, to expand our position with new digital platforms, new partners, and new offers. With several systems and applications in place, we've already started. No one can tell exactly what the future of manufacturing will look like, but we know what we need to do to get there, and we will. Because in the end, productivity is not just about cutting speeds and feeds. It's about cutting the distance from A to Z. And this is where we belong.
One of the key takeaways from this little film is this increased interaction within the manufacturing process. As Klas mentioned earlier, we see metrology moving not only in line closer to machines, but actually into machines. Very close to our home turf and our core competence. We see increased cooperations between ourselves and CAM suppliers. We see signs all over the manufacturing chain that this is happening. Again, one of the key ingredients to be successful, our firm belief is that the application knowledge, knowing the components, knowing the processes, that's going to be absolutely key to be successful going forward. That's where we have our strength, and we need to leverage that strength going forward. With that, we want to add value throughout this entire process. Obviously, in machining, that's our home turf, and we know that space.
We have solutions into preparation, in tool management, vending solutions, for example. I'll get back to that shortly. Also in the areas of metrology and the design planning phase, understanding the components, materials, et cetera, is absolutely key. Through partnerships, acquisitions, we want to broaden our reach throughout the manufacturing process. It was mentioned in the film that we already have stuff ongoing. TDM Cloud Line is, I think, the latest addition to the product lineup. It's a cloud-based tool that enables customers to track and manage their tools and their tool assemblies. As we develop these products, we try to be extremely customer-centric, always having a concrete problem to solve. In our view, there's too many digital solutions out there still searching for a problem to solve.
We would rather go down the route of identifying specific customer problems, it doesn't have to be about changing the world, but solving real problems. TDM Cloud Line is a good example of that, because believe it or not, customers are actually spending a lot of time and effort and headache on trying to fix poor tool data and keeping track of it, different formats, et cetera. Our ambition with this product is to help them to solve that specific problem. The product has been developed with usability in mind. A lot of programs and products in the market today are fairly complex. User-friendliness hasn't really made it into manufacturing yet. We're trying to break new ground, in just five clicks, you can actually have a complete tool assembly with this product.
We've also broken new ground in the way we've built the program, start to finish in three months using new, modern ways of building digital products. There's a lot of interesting stuff for us also internally in the launch of this product. We did the first launch for the market at EMO in September of this year. Tremendous interest, attracting partners and customers in a scale that has taken others a year to achieve. We've had a fantastic reception. Currently running beta testing. Sales will actually start next Friday, if you're into fiddling around with tools, you can go online and sign up. Another example in machining is this product. It's the CoroBore Plus from Sandvik Coromant. Sandvik Coromant launched their digital product lines, or did a pre-launch in 2016, and there's been more content coming out throughout this year with the Silent Tools Plus.
During next year, products like this, but also combined with digital solutions around process control, will also be launched. The interesting thing with this one is that it's not only sensor-equipped, it actually also has a motor that enables it to automatically adjust cutting diameters without having operators doing the manual fine-tuning that needs to be done today. There's a lot of innovation in this piece. We'll leave it here so you can touch and feel afterwards if you want to. Moving into additive and what we're doing there. Before we get into the customer offering, I think it's important that we talk about the starting point for Sandvik, because I think it's fairly unique. This is a simplification of what you need to create an additive product.
Obviously, on the material side, you'll hear SMT talk more about it later this afternoon, we have a world-leading position in terms of providing powders for additive manufacturing. When it comes to the actual printing technology, we were fairly early in investing in R&D facilities to run not just one technology, but several technologies. What are the materials that work well? For what applications? How do you mix materials and processes to get the optimal product? Then we have post-processing, and this is around heat treatment, sintering, and the final machining to get a good component with the right characteristics. Obviously, that's the home turf of SMS. That's what we do all day long. From a manufacturing or technology perspective, we have a fantastic starting point. The last bit, which I don't think should be underestimated, is the customer reach.
Klas mentioned that we have 100,000 direct customers today. We have a distribution channel that allows us to reach them in 24 hours. Obviously, it's the same customer base that will be looking for additive products going forward. All in all, we have a fantastic starting point. A lot of players want to get into this market, but I doubt that there are many others with the breadth of capability that we have. That breadth of capability is really important as we talk about the strategic direction and the type of products that we want to offer to the market. First of all, and it's a fairly obvious one. Again, powder is important. It's going to grow. We have a fantastic starting point.
Combining the capabilities from a metallurgical perspective from SMT with our distribution and customer reach, we think we can take that to the next level Secondly, around manufacturing services, being the biggest part of the additive market today, essentially contract or Lego manufacturing. We think there is a point in time, short to medium term, when we need to help customers to get up to speed. Long term, we don't want to be a contract manufacturer, but short to medium term, there's something there that we can offer to customers. Thirdly, on advisory services, and this I think is the biggest one and probably the more complex one, so we have a bit of a deep dive into that. Advisory services, again, from a fairly broad perspective, we believe that's the strength of our offering. 150 years of experience when it comes to metal alloys.
We have alloys that's 30,000 feet up in the air, sub sea, nuclear power plants. We have that know-how, and we can turn some of that into powders for the future. Again, the printing process, I'll talk a bit more about that, but expanding our capabilities of understanding different technologies, setting process parameters is going to be key. Then the whole post-process development. The key for us is not just offering these things in isolation, but if we can find this combination, and that's what customers are asking for. They don't know how to move into additive, and if we can help them from A to Z and get their journey started, we think there's tremendous value in that. We see good interest from customers already.
Another key target for us within additive is obviously also enabling our own internal development and creating and building products for ourselves. Klas showed a picture of the CoroMill 390 earlier, and we actually have it live here in three examples. One old school, one additive old school material, and one additive titanium. This one being 80% lighter than this one, creating significantly less vibration in operation, driving productivity up by 50%. Fantastic internal innovation for us to sell in our normal go-to-market models through our PAs. Again, feel free to come up and fiddle around with them later. As you all understand, we are in the build phase of our additive business. We've built centrally around the R&D center we have here up in Sweden. We need to continue to do that and strengthen the capabilities.
During next year, we also look to expand this footprint, and establish competence centers in the key markets in the world. This could be done leveraging the productivity centers we have around the world. It could also be done through acquisitions if we find footprint in that way. That remains to be seen. Clearly, during next year, we want to expand and move into the world in the space of additive. With that, I hope I was able to give you a quick overview of the market trends that we see and the strategic direction that we're following in the space of adjacent. With that, Klas?
Thank you, Fredrik. Let us fastly wrap this all together so we can allot some time for Q&As as well then. We are a customer-centric company. We will continue to deliver customer value through different processes, through different products, and so on. We are a technology and innovation-driven company, and I think you have seen, and I hope that at least you have been a little bit thrilled as I am on all the opportunities we have in our industry. It could be old school or new school. We have an operational excellence system that is a part of our DNA, and we will continue to move that forward. Then we are adding now M&A capabilities, starting to understand, first of all, finding a funnel, what and who should we acquire certain companies? Then at the end, you need to fall in love from both sides.
I cannot promise any specific time, but I can promise you that we are working hard with it. If I briefly summarize it, we have possibilities stemming from the machining capabilities, using different ways of working, driving core and adjacent. Our vision, our dream, is to move from a niche player in machining and start to embrace a larger part of the manufacturing world, delivering increased growth, maintain high profitability and returns. This will be done step by step. Time to go underground. I'm Lars Engström, heading up Mining and Rock Technology. I'll cover the first part of this BA session, then we'll go digital with Pat Murphy, my PA President for Rock Drills and Technologies that will take us into the world of automation and software. A presentation in Mining and Rock Technology has to start with safety.
Safety is something that's extremely important to us. We have a good record comparing to the industry. We're doing very well. We're also proud members of the Mining Safety Roundtable, where we interact with many of the mining houses, the big mines around the world as the only OEM. It's a place to envy, to be in.
It's not only that we're focusing on our own operation when it comes to safety, it's really an important aspect of when we develop products and solutions, especially, of course, in automation, which is a very good enhancement of safety for our customers. Okay, move it, please. Let's look a little bit on our products and applications to start with here. This is an exploration drill. We move to a surface rig. Smaller surface rig, top hammer. This is a pedestal drill. This is going nice. Tunnel rig. Bolting rig. We're putting in rock bolts. We have a two-boom jumbo for mining applications. Production drill, underground, long holes. A continuous miner, mechanical excavation is used there. A road header, also mechanical cutting. Raise borer to make shafts between different levels. Loader and a truck, load-and-haul business. We move surface again, mobile crusher.
Stationary crusher. That was a fast run-through of our main applications and products. We'll go on here, I hope. Right. Last year, just after the Capital Market Day, the new business area, Mining and Rock Technology, was born when we merged mining and construction into one business area. Now we are 15, 16 months into the journey. We run the business in a very decentralized way. I have 8 product areas that are responsible for their P&L and balance sheet, empowered to run the business, and that's where we take the majority of decisions. In front of the customers, we coordinate this through our sales areas. We have 14 sales areas. It's pretty clear that it makes sense that these businesses that very often go to the same customers are coordinated in front of the customer. The journey has been excellent so far.
We have seen that the management teams are taking control of the business, drives efficiency, and I think we're well on the way. This is the team that runs it. It's pretty much the same team as I showed you prior to going into this organization at the last Capital Market Day. There are a few smaller changes. I think they also look a little bit older than the photos, but if we look at the performance then, we can see that we have a good growth. You know that. For me, top line is one thing, but how you really assess if you're doing well is if you're taking market share or not. Of course, that's not a precise science, but if we start with the aftermarket, I'm fully convinced that we're grabbing market share. I'll come back to that later in the presentation.
If we look at the equipment side, comparing to the data that's available from peers that are releasing public reports, we have definitely maintained and grown in some areas market share. I'm pleased with the top line development. Profitability, last 2 quarters have been 16%, last quarter just north of 16%, so we're almost at 16% year to date, meaning after the third quarter. Leverage here, if we compare to last year, is more than 60% year to date. And that's FX neutral then. We really get the profitability from the top line down to the bottom line, which is important. The starting position we have, one should expect that from us as well, because I don't think we did run our business in a very good way before. We're doing now, and we see it's developing.
Björn mentioned it, we're within striking distance in an apple-to-apple comparison to our biggest competitor. No names, but you know who. It's up to you to define what striking distance is, but it's fairly close. Net working capital, 25%. We were hovering around 28%-34% in 2016. Here we also see a good development. Our business now is 72% in mining. This is year to date after three quarters. Construction, 25% of our revenues. Oil and gas, 3%. If we look with the uptick on equipment now, equipment in the first three quarters of this year was 37% of our sales, and the aftermarket 63%. This is year to date after September.
I would say a more normal figure when if there ever is such a thing like a normal market, the aftermarket will constitute about 70% or close to 70% of our revenues. Commodity prices. That's of course an important thing. You know from before, gold is 30%, copper around 25% in our commodity basket of our business. Here you see the development week by week up to week 45. Commodity prices with our weighted basket is on a rise. Of course, this is good for the business. The longer it lasts, the longer the trend upwards goes on, the better it is. You can see definitely here that we had tailwind from this, and that's, of course, driving volumes.
I'm going to take you through a journey on our product areas and how we categorize them on the stability, profitability, growth scale here. I'll also go into the business unit. Some product areas have multiple business units. A business unit is something we also run with a dedicated management team, full P&L balance sheet responsible. It's a PA within the PA. If I start with mechanical cutting, they are far to the left on the scale, of course, driven very much by coal. That's the main application for these. It's part of potash as well. Coal market is picking up somewhat. We don't see so much activity, at least not yet in orders of new equipment. Rebuild, where you give new life to machines that have quite a few years on them, that's picking up. We see more activity in the aftermarket.
A lot of focus goes into the RMDS, taking this mechanical cutting into hard rock cutting, meaning being able to do rock strength for more than 200 megapascals. We now have our first machine in our own mine in Austria, working since a couple of months. This is quite a big evolution step. We're working on teething challenges and so on. Once this is done, the machine will go down to South Africa. From the interest of the market, we can clearly see that the market really believes in our concept here. We just have to get the initial bugs out. There's a lot of NDAs being signed and customers being very much interested in this. If we move on to rock tools, rock tools consist of Varel. 70% is oil and gas is Varel, the rest is mining.
Here, as Björn mentioned, that we have a very good development, a little bit uptick from more rigs in the U.S. market, where it was down on 370 rigs, low level in early 2016. It's up around 900, 925 rigs now. Rest of the world is very stable. That drives our business. Varel, the management of Varel is doing a good job in focusing on cost and capital efficiency. As you heard Björn saying, if we take away the part of the goodwill that's amortized, the PPA, they've been approaching 10% EBIT certain months with a healthy trend. That's good. Rock tools, the traditional drill steel business. Big focus for us here has been working on the logistics cost.
Logistics cost is quite high cost in this business. We've been working out a lot of it to improve actually the EBIT in the rock tools business by two percentage point by being more efficient in the way we distribute the products. The focus on the products go into utilizing Sandvik's material expertise in cemented carbide, playing around with different things in the carbide, and also changing the configuration of the bits, how you put the carbide, all to give longer life. Here we have had some interesting product releases. If we go into surface drilling, three BUs, pedestal drills, boom drills, and exploration. Pedestal drills to the left, that's where you do big rotary blast holes, 12 inches around that hole size. Here we're definitely not the market leader. Our biggest competitor is ahead of us. Here we're working intensively to closing the gap.
A lot is going into product development here. We released the first 12-inch rig a year ago, with highly automated features as well. The larger rig is coming. It's about to be finalized, there's more to come. This is very much a product development focus here to get the population out there. Some people might see this as a problem, I think it's a fantastic opportunity to get it right. Exploration, small business, profitable when you run it in the right way. We didn't run it in the right way before. In our old structure, we split up aftermarket parts and service and equipment in various parts of the business, that's a recipe for not being so successful. It's now moved together under one business unit management team, they're starting to forge the things together.
If you look at the market, it's not so much equipment being sold yet. There were a lot of idle rigs, this exploration activity is picking up, definitely the activity in the market will be double digit in the years to come. On the boom drills, we have a very strong position here. The focus is improving profitability and releasing new products where we have some parts of the assortment that can always improve. If I move into crushing and screening, you heard about mobile crushing, good development, pretty much following the projected path. The focus here is we pruned some of the products that weren't profitable, focus is on the aftermarket. A little bit more challenging since the business is going through dealer sales, it's growing the aftermarket business for mobile crushing, that's good.
Stationary crushing focuses very much on life cycle costs on the aftermarket, reborn concepts, where we rebuild the crushers, secure the aftermarket for the years to come. That's the big business here. If we compare it to the market leader here, we have had a very good, solid profitability development in the last year and a half since we formed the new organization. Up to the right, you see the breaker business, small, nice business of hydraulic breaker attachments going on excavators and so on. Significantly higher profitability than the average of the business area, a nice business. The focus goes on to go into the right performance segments with the right product, to line up more OEM sales where you sell these to people that do excavators and so on. A very healthy business.
If we go into load and haul, now we come into the hard rock underground. Here we're doing extremely well with our larger trucks and loaders, it goes well for the range. Before we introduced the 51 and 63 ton truck, we have them in i-series, meaning ready for automation. We're going to repeat the same process now. In December, I'm going to Perth in Australia for the launch of the corresponding loaders with intelligence in. It's going to be 14, 17 ton in December and a 21 tonner coming out shortly after. Of course, electrification of gear is coming here. It's starting on the smaller gear due to battery capacities and so on. What we're now looking at is we're taking a little bit of a different approach to the mainstream here.
We believe that what you see in automotive will also happen here in underground mining, meaning fast charging of batteries. We don't believe that the market wants significant battery packs that has to be swapped, and you have to keep spare in the circuit, and you have to excavate to have space for them and so on. We're going for fast charging, where you basically could charge a battery in 15 minutes and the battery stays on the vehicle. Our first machine on this concept is now in Canada for proving itself. This business is also very much resting on the automation capabilities that you will hear much more about later on. Many people claim fame in this area and have beautiful maps on where they're going. I think you need to have that in this fast-moving area, but you also need to stand on a very solid platform.
More than 200 machines that have been automated over the years for us started in 2004. More than 25 customers, the machines have clocked up more than 2 million lost time, injury-free hours. That probably would be interesting for others to compare themselves to. Underground drilling, another very well-run business. The aftermarket here is also very important. We see clearly that we're doing well here. We launched. It's big pickup. You heard Björn saying it's more than 100% ramp-up of capacity here. We're having our hands full doing that in Tampere and León now, ramping up, adding satellites, adding short-term people to get the stuff out. If we talk about electrification of vehicles here, we were launching the DD422iE that you see on the picture in Las Vegas in October in 2016, it's going very well.
Canada is driving the electrification, we sold units there, but also in Sweden. It's an evolution process. It's not like this replacing diesel equipment overnight, but the journey starts. Let's go on. One more click. Aftermarket. We talk a lot about the aftermarket, you've seen that we have mid-teens growth rates in the aftermarket in the last couple of quarterly reports. What is it that we're doing in the aftermarket? Well, it's really no magic. It's hard work based on facts, structure, and execution. It's not a magic recipe, but this is something we've done over the years now. It's all about knowing where the fleet is, how the fleet is run. Once you know that, of course, you have a good start. You couple it with your sales, and you have consumption models.
A loader that's run this way should consume that much. Of course, you need to know how the equipment is run, under which condition. Basically, you get then market share by spare part. You can know market share by part in theory, you can start to address your potential. We also have worked a lot then. As a part of the execution, you need to have the product. We have globalized products, we have service and repair kits for components, we have Sandvik Genuine lubrications, we have different products and services depending on product and application. We're working with the dealer structure to have products for the part going through dealers that is tailor-made for dealers to sell, you could go on. Of course, different kind of rebuild, reborn concepts. It's very important.
We put service people closer to the equipment in order to service them. In our customer support centers, we see more and more business coming in through our e-commerce platform. Almost 50% of the over-the-counter order lines come in that way, the customer service centers are changed to be proactive to working with developing the aftermarket with proactive things. It's strong execution, as I said. It's about having the systems, the structure in place, identify where is the gap, take ownership, have a plan, close the gap by doing the right things, utilizing the product assortment. It's nothing more than that. It's no magic. It's just hard work. That's what we're doing. Here you can see, there, that it's really paying off.
The orange line shows the weighted commodity production development, the bluish line is showing what kind of development we have over the years here. Here we're really taking market share on our own equipment, which is good. Just to say, why is aftermarket important? 1, it's always there. 2, it's very profitable if you run it the right way. 3, the most important thing, it's the best way to sell the next fleet of equipment. That's where you win or lose the next battle for the next fleet. Move it.
I am knowledge I was born of data, the seed of all knowledges. I am certainty instead of an opinion, the firm foundation, the pedestal to build your success on. I am the one that gives you the means to make smart decisions. I am insight, I am awareness from which understanding and expertise stem from. I am a true boost to your productivity. Functionality and performance depend on me. Still, despite all of my qualities, I am nothing on my own but everything with you. I am knowledge. Meet me at My Sandvik.
I was hoping for mobile phones with a flashlight on, I guess I didn't get that. Seriously speaking here, the digital is coming in here. We have digital portals now, you can really hook up if you're on such a subscription and have the equipment with any device, starting to get the information, Sandvik inside Sandvik productivity reports, eventually this will also be used for predictive maintenance. With this portal, you can easily draw real-time data. You can get location tracking, you can get productivity reports, volumes, engine hours, bolts set, so on and so forth, alarms of the equipment if something is wrong. You can get service bulletins. You have your tailor-made spare parts book for exactly the piece of equipment and with the configuration you have. You can easily order. You're hooked up to the e-commerce platforms.
You can easily go in there and choose what you want to order and so on. This is something now where we have more than 600 pieces of equipment hooked up. This is going out basically with all new equipment. We have more than 1,000 customers that signed up to be utilizing this. This is going to be a very important tool in the future for how we conduct our aftermarket business. To segue into, I think, what is the main attraction here in our business area, the automation presentation. We work a lot with this. We have a very solid position, as I tried to explain before, giving some reference data about our installations. We have worked with establishing our digital strategy, and there are three pillars.
The one to the left is about automation, where the machines can start to replace what the operator did before with better repetitive functions, and you do it the same way. It's leaner to the equipment. The connected equipment, which I've been alluding on, how important it is with My Sandvik. Eventually the strategy where you basically use the connectivity and start to really process the data in a meaningful way that gives the customer higher productivity to lower cost. That will be my segue into Pat, so you will take over from here, please.
Thanks very much, Lars. Again, my name is Pat Murphy. I'm the President of the product area, Rock Drills and Technologies, of which the automation business unit sits as well. Just to recap a couple of things that Lars just mentioned. This is our digital offering framework, how we think about our digital offering in SMRT. It's a product of a strategy work that we started over a year ago. We launched internally in May 2017, then externally to customers in September 2017, to help clarify where we're going with this and where we're investing as well. Digital is a very confusing topic sometimes. There's a lot of different buzzwords in the industry. We thought it very necessary to make a simple framework that everyone could talk about, employees and customers alike. Just to recap what these are and just with a couple of examples.
Autonomous equipment and features. For example, we have AutoMine loading and hauling automation production system, as Lars mentioned. Connected equipment, the best way to think about that is we're connecting the installed base of our fleet into the industrial internet effectively. The main offering we have there is My Sandvik, which is a customer portal, has a B2B e-commerce functionality. As Lars mentioned, electronic part catalogs. Also basic reporting as well, how many hours the machines are accumulating, et cetera. Our more enhanced, let's say, information management system is in the third pillar called analytics and process optimization. We have long been selling process optimization software, but this is really coming together now on a platform that we call OptiMine. I'm going to go into OptiMine a little bit more detail in just a minute. First of all, why digitalization?
It really comes down to three things. When we talk about mining and construction customers, we're going to improve health and safety, reduce cost per ton mined or meter drilled, and increase productivity as well. Those are really the three things that our mining customers want when they approach us for digitalization discussions. On the right-hand side, you'll see a more granular description of some of the benefits of digitalization, and I'm going to be taking those in turn in some of the following slides. At the end of the day, it's about increasing the transparency into the mining operation and then where you identify opportunities to do things like continuous operation, run the machines over shift change, run extended hours on the machines, avoid downtime through predictive analytics, as Lars alluded to, and overall increase the optimization of the operation.
If we take that last one It's a good segue into OptiMine. That's the third pillar, analytics and process optimization. I'm going to start on the right-hand side here, where we have a suite of software tools and technologies that we call OptiMine Short Interval Control. Short Interval Control is not a term that Sandvik has invented. It's an industry term for how you actually control what you're doing in the shift in the mine during the current shift, so that you can affect what happens in the next shift of the mine. You're basically increasing the clock speed of the operation effectively by providing transparent information. We have specific software modules there available in the OptiMine umbrella. Location tracking is where you can basically track your assets around the mine, where they are.
Sounds pretty funny, in a lot of cases, it's very difficult to find out where the machines are, especially in a big mine. Some mines have a couple of hundred kilometers of workings even. If you can find the machine when you're starting the shift, that's a good thing, generally speaking. That means you can get to work faster. Location tracking helps with that, and it's got centimeter precision accuracy, actually. It's the same navigation location tracking technology that we use in our automation system as well. That's industry-leading. 3D Mine Visualizer is now a more enhanced 3D mine model development tool, where you can map with laser scanners as you're driving around the 3D workings. That helps to feed in not only to location tracking, but you can also do things like calculate automatically the amount of rock excavated.
You can determine if your previous blast has gone to plan or not, that allows you to make adjustments for the next shift. Scheduling is kind of like a Gantt chart tool. It's OEM agnostic. It doesn't matter if you have a Sandvik fleet or not to be able to use this. Of course, we prefer that it's a Sandvik fleet, it's not absolutely required, to schedule what's happening in the current shift. It's a short-term mine planning tool. Then linked to that is task management. We can send to operators underground or on surface via mobile devices, whether they be tablet computers, whether they be mobile phones, commands and tasks to do based on input from a mine operations center where somebody can see the big picture of actually what's going on.
By the way, the people with those tablets can also see where they are on the mine as well, kind of like a Google Maps for underground. We have a Drill Plan Visualizer, that shows not only the orientation direction of where you've drilled based on your original setup, also the type of rock that you've been drilling in. That's why you see a color gradient there. That's useful if you're doing, for example, Lars showed the picture of the long hole production drill. If you'd be drilling into ore and you would want to know how to correlate the drilling data to the grade that you're drilling, that could be a useful piece of information that you could feed forward to the mill, for example. That's what Drill Plan Visualizer is about.
Those are more or less tools that are based on local servers at the mine sites. Now what we've been doing for the past over 12 months is developing this new module called OptiMine® Analytics. That's about putting the digital plumbing in place to get all the data continuously flowing from the underground mine operation into dashboarding and into, in fact, what we call our mining IoT hub, the cloud service. It's actually run on Microsoft Azure currently. With Microsoft and with the help of IBM and their predictive analytics engine, we've been building predictive models on what the machines are going to do in the future and in terms of their life cycle, component health as well. Lars mentioned that predictive modeling is quite useful for gaining insight into what's going to happen.
That's very useful from not only a Short Interval Control point of view, but also a medium-term planning point of view as well. You'd like to know if your machine might be unavailable in a couple of weeks' time. Of course, that's all about to be able to leverage that. You need to have a lot of data, that's an area that we believe we're uniquely positioned as an OEM compared to any third party who would approach this type of software. There are, of course, many of those out there who are bringing Internet of Things platforms to the mining industry. This is all very exciting for us. We've been piloting OptiMine® Analytics now with a couple of customers with very good feedback and results.
It's important to mention that it's also integrated with the customer digital ecosystem, meaning that there are open interfaces there. We recognize that we don't control the total software suite that's available at the mine site, okay? There's many different players, there's ERP systems, there's other types of safety systems. It's not our goal to have the total end-to-end scope of software used at the mine site. This software has to be very easy to interface with all of those other systems. That's what we've created there. Why do we do this, you ask? Well, because it helps us to get a lot closer to the customer, helps us to understand what's happening with the fleet. It helps us to improve our products, it helps us to gain better aftermarket share. All of the above, actually.
Stepping back, just once again to look at the benefits of digitalization. This is an interesting way to look at the productivity gain and how that can arise. This is an illustrative production profile originally furnished by one of our customers, Boliden, then we've adapted it and modified it a little bit. It just shows the concept of how the production rate at the mine site typically fluctuates over the course of a 24-hour period. It does that because of many reasons. There's shift changes. There could be delays. I mentioned the trouble sometimes in finding equipment. There could be scheduled losses. Maybe the operator is not rostered for that particular day and not available. There could be unscheduled losses. There could be unplanned breakdowns as well.
This is the kind of invariability that you get, and the kind of, sorry, variability that you get when you look at a production profile. By applying digital technologies, remember again the three pillars, automation, connectivity, analytics, and process optimization, then you can fill in those peaks and valleys. You can enhance production where production did exist. In fact, you can put production where production didn't exist by filling in those valleys as well. This smoothens out the production profile, it enhances the production profile and creates a more predictable situation for the mines, which is something that they really, really value. If we put all this together and look at the digital ecosystem through the lens of the mining applications that we serve, those being drilling, loading and hauling, crushing and screening, mechanical cutting, for example.
This is how we look at the digital ecosystem when it comes to surface and underground mining. This is obviously a fictitious mine. You would never be deploying all of these types of equipment in the same place, or you'd never be running this vertical shaft next to this open pit only at that depth, for example. It's just to illustrate the point. If we take the bubbles one at a time, let's talk about some of the things that we have going on here. By the way, this is not the mine of the future, this is the mine of right now as well. We've deployed these technologies in various mines around the world. We have the truck, the TH663, driving up the ramp here under automation, and continuously supplying data to the operation center at the surface on the right-hand side.
We have a loader fitted with a 3D scanner, for the purposes of mapping the mine and detecting any changes that might have happened since last week or yesterday or two months ago in terms of the tunnel that might be converging, for example. We have a long hole production drill here providing data about the ore body back to the control center for the purposes of redesigning or optimizing the drill plan for the next shift as well. Then we also through our partner ecosystem, we also have the ability to automate things like rock breakers and crushers as well on the right-hand side to ensure the right fragmentation's actually going up the shaft and going to the mill. All of these assets are providing data. You'll notice that some of the assets there are from other people as well. They're not all orange.
That's really important in this type of ecosystem that you have interoperability when it comes to information exchange as well. The other thing that's very important to recognize is that all of this data is collected in a network system. It's delivered to an automation control room, in this case it's AutoMine control room on surface, an information management system. OptiMine is being run on the bottom right-hand side here. Both of those systems are exchanging that information with Sandvik's, basically IoT mining hub, to make sure that this particular customer gets the best advantages out of the equipment based on what we've learned elsewhere as well. It's really critical that you have the connectivity to be able to do this. On that note, we'd like to announce a new global partner today, which is Cisco.
We've been working with Cisco for a little while now, some months. We've been testing some components. We've done some customer deployments with Cisco, now we formalize this into a partnership as well. I think I already discussed what we bring to the table, but Cisco's obviously a leader when it comes to networking technology and networking security. One of the most important things we do when we deploy an automation system is we need to guarantee a certain amount of uptime for the automation system itself. By bringing Cisco to the table on these deals, we have the ability to give a very high level of assurance of reliability of these networks that the automation systems run on. We're very excited about this.
If we talk now, something I'm guessing you're probably quite interested in, which is the commercial logic of the digital offering as well. In this one slide, this sums up how we think about it. If we look down on the bottom left-hand corner, premium pricing and market share, I mean, that's obviously key for us, and that's kind of the way right now that we're capitalizing in the best way on this technology. We get technology leadership. We get more and better tons and safer tons for customers, and that makes us a lot more competitive. Of course, whenever we put in something like OptiMine or something like AutoMine, we also generate digital revenue, of course, from the project implementation, license, and service fees that go along with that as well.
Of course, in the case of My Sandvik, we facilitate the order of parts for our customers as well, which also creates additional business for us. When we put a machine on automation now, looking at the second tier, we talk about additional revenue and profitability. A lot of people don't think about this. When you run the machines on automation, they run a lot more hours. That generates a lot more consumption of consumables as well. That's additional business for us. We also have contracts in place where we pay for performance. Those are typically related to things like uptime or, more typically, things like availability agreements that we have in place to maintain the equipment to generate revenue on that side.
Obviously for all of these, driving the aftermarket for the reasons that Lars just mentioned are very central to our commercial logic of digital here. If we look at the 3 tier, new sources of revenue. We don't have any of these in place right now in terms of gain share, but if we would be working with a customer and the customer has an objective to increase their productivity by X, we're looking at ways to engage in contracts there where we would then agree to, if we were able to achieve that target, then we would be entitled to a certain portion of that benefit as well. It's no doubt the case that we've expanded the market size already with these technologies. In other words, we've made ore reserves that have been marginal earlier to mine.
We've brought those into the realm of feasibility that we can actually mine those now because of the fact that we're able to drive the cost per ton down by deploying these technologies. Okay? This in a nutshell tells about why we see the benefit to digital here. The customer gets a lot of benefit, but to the extent that we're the leader here, we can also get a lot of benefit ourselves. Just to give you a concrete example, we're not talking about something theoretical. We have many examples, but this is a really important one for us. We have a very progressive customer, Resolute Mining, who's listed on the Australian Stock Exchange. They're a gold miner. They have operations in Australia and in West Africa as well.
They approached us for an automation production system for their greenfield gold mining operation in Mali in West Africa. A few years ago, that would be an area of the world that probably wouldn't have come on the radar for automation. It has historically, up until the past few years, been very much restricted to the realm of, let's say, sophisticated Western mining operations. Now, Resolute, unlike a lot of their peers in the industry, they've seen the potential of this technology. It's proven technology. In fact, it's required that they use this technology in order for them to realize their all-in sustaining cost per ounce of gold mined as well. This is a key part of their business plan, the fact that they've adopted Sandvik Automation. This is their slide. We didn't make this slide.
They graciously agreed to let us use this slide, this lays out some of the rationale of why they would turn to Sandvik for an automated production system. Again, I like to highlight here a couple of times it appears proven technologies. These are not things that are in the future. We've deployed the systems. We have them available. We're working with customers like Resolute to deploy them now. We asked the CEO of Resolute, he was more than happy to oblige to just give his short comments about why they've selected Sandvik as a partner here. We have a short video that I'll end the presentation with. This is John Welborn, CEO of Resolute Mining.
Resolute Mining Limited is an Australian gold producer. We've been exploring, developing, acquiring, and operating gold mines for more than 28 years and have produced 8 million ounces of gold. Currently, we operate the Syama Gold Mine in the south of Mali and the Ravenswood Gold Mine in North Queensland, Australia. We're the owners of the Bibiani Gold Mine in Ghana. Digitalization in mining is a great opportunity. For Resolute, it's a fantastic way of us focusing on productivity and the priority we have in reducing the cost of our operations, also increasing the safety. Lots of vendors out there of software and hardware in the mining industry promising wonderful improvements.
From Resolute's perspective, we have the advantage of having a long history of technical success in operating gold mines. We need to be very careful about choosing the right technology that's going to result in absolute capital savings and/or operating costs and safety improvements. That's what we're focused on. In reality, for the sub-level cave that Resolute's building at Syama, Sandvik are the only equipment provider that can offer the full suite of equipment in an automated setting that we require. The ability for Sandvik to collaborate with us, with Resolute, in the design phases of our underground mine has been really important.
Not only is this around the equipment we're going to use and how we're going to operate it, but it's the actual design of the underground infrastructure and the ability to match that with our ambitions to have an automated mine that uses equipment provided by Sandvik that operates in a way that's going to increase productivity, lower costs, provide safety benefits, and be a genuine mine of the future. That's the unique capability of Sandvik and the partnership that we're working on. We have an ambition to grow our portfolio to operate long life mines at low costs. If Sandvik are providing equipment that has the productivity gains through automation, through maintenance savings, and through safety benefits that we're expecting and hoping for, we'll be a more profitable miner.
We'll expand our operations both at Syama and in the region. We'll have a mutual relationship that builds value, not only for Sandvik, but for Resolute, our shareholders, our host countries, and all of our stakeholders. That's what we're working towards.
Not only a summary slide, but just to try to wrap it up a little bit from the BA. We're pleased with the development in the first three quarters. You can always do better, and that's our ambition, of course, to always improve the way we do things. Sometimes you have tailwind, sometimes headwind in the market, and it's pretty clear that we have had tailwind in the first three quarters. I'm pleased with the way we've taken the bottom line down to the profitability line as well. We reduced our net working capital. We're growing the so important aftermarket, and that's something I'm religious about for the three reasons you remember, but I'll repeat them. It's always there. It's very profitable if you do it the right way, and it's most of all, the best way to sell the next fleet of equipment.
We will stay religious about that, working on it. Also, there's definitely our organization is young. We only had it for 16 months. As Björn described on a question earlier, that having this big ramp-up in volume in most of the PA, especially the equipment PAs, of course, that takes a little bit of focus away from the continuous efficiency and process improvement. There is an untapped potential for the future there, definitely. Going back to where Pat ended up, we see much more activity on the automation side. The mining world seems to be moving in the digital direction like the rest of the world, and that is good because, of course, to be successful there, you need to have proven equipment that can be automated, and you need to have a solid experience of actually doing it.
I can only echo John Welborn, even though I'm probably a bit more biased than he is that we have that capability. Something that we sometimes forget to add to the picture, we have a third very important link to this, that we have a set of mining expertise people that we call Trans4 Mine in our business area that can go out like, of course, they're branded, but they're really seen as a consultancy firm, and they know a lot about mining processes and best practice, and they naturally fit into the equipment and the automation experience when we go to mines like Syama in Mali. It will be an interesting development here, but I'm sure that automation will grow even more important in the future.
Welcome to the SMT part of today's Capital Markets Day. My name is Göran Björkman, and I am since three weeks back, the President of Sandvik Materials Technology. This is the agenda today. I will start with making a short update on the business area and then move into our current situation, our current performance. Maybe I should say our current poor performance. Guide you through our portfolio, and to do that, I have a help with Mikael Andersson, who is Head of Product Area Tube, and Annika Roos, who is Head of Product Area Powder. First, let me introduce myself, Göran Björkman. I have spent my whole career in the Sandvik Group, and actually I started in SMT, where I spent my first 18 years, running tube production.
I've been Head of Tube Finance. Before leaving to SMS and Sandvik Coromant in 2008, I was Head of Primary Products. In Sandvik Coromant and SMS, I have been leading the production unit consolidation program, the lean efficiency program with good success. Now back to SMT since 3 weeks. A red thread through my career has been operational excellence, performance management, strategy design, strategy execution, a lot of change management. I think I've got myself quite a challenge here, and I think what I've been doing the last 27 years will be good to have also going forward. The business area. We are, as you know, a high value-added company, in advanced alloys and advanced materials. Looking into the pie charts in the middle, I think there are good opportunities to grow our business further outside Europe.
Looking into how the share of advanced alloys are, we certainly want to and need to increase that share. We're pretty CapEx-heavy when I look into our segments, and of course, that is due to our strong position in the energy segment being oil and gas and nuclear. We have recently made adjustments to our organization. This is our current setup, where we now have moved a lot of both resources and responsibilities from central functions out to our 4 product areas: Tube, ConSol, Powder, and Strip. With this, we have moved decision closer to the business and increased accountability. I will be back on that, but I think this is very important enabler for the journey I see that we have ahead of us. Our current situation. This is not the most proud slide.
Of course, being only 3 weeks on this job, I will not be able to give you a very detailed and comprehensive strategy. What I will do is to share my view and initial findings, on the business area. This development with reduced revenues and which has hit our profit margins and profit levels a lot is, of course, not satisfactory and not at all acceptable. We have taken mitigating actions. Michael will describe much more of that from the Tube perspective, and I think those decisions are the right ones. Sorry to say, those decisions should have been taken about 2 and a half years ago. We are late. It looks like SMT has been betting on an increased oil price.
I think going forward, we need to secure that we can be profitable on today's levels around $50-$60 per barrel, and also prepare for even worse scenario. During my first weeks, of course, I've asked a lot of questions, and I've received a lot of answers. Based on that, I think I can see that we are not at a level when it comes to operational excellence and commercial excellence that I would expect. It looks like if I start with operational excellence, looks like we have a program culture where we do nothing, and then when it's too late, we act, and then we have to act big. Not only that means that you're always late, it also costs more, and it takes a lot of energy from the organization.
My way of driving operational excellence is quite different. This is something we need to do every day, every week, every month, every quarter, every year. I think also setting clear expectations that the organization needs to deliver on. Even a flat volume scenario, we need to improve competitiveness, meaning that in a flat volume scenario, we should improve our own productivity, beating inflation, and improve cost efficiency. That is not the case right now. Looking at commercial excellence, I think we have some very fantastic products, and in some cases, excellent market position. I think we have a responsibility to lead the price game in those areas, and I see opportunities when I ask around in my organization. On top of these internal challenges, there are, of course, also external challenges. Oil price, as I wanted to mention them. Also we see increased competition in Asia.
We see Chinese competitors climbing up the value chain. There is also opportunities. We have strong industry economic fundamentals right now. There is a transition to powder. Annika will describe that much more. Also a move from gas furnaces to electric furnaces. I think we're also well-suited for the sustainable offer. Maybe, or I'm sure that at least short term, the biggest opportunity is to turn weakness into strength. I will address operation excellence, I will address commercial excellence in a very clear way, and focus much more on strategy execution than making plans. The actions that we have already taken, are they enough? Once again, only three weeks. If I do my math, looking in where we are, and where we need to be within two years, having a couple of years of inflation, my conclusion is that it's not enough.
Of course we need to prepare for more. Today, I will not be able to tell you what that is, but of course it's about cost, it's about good leverage on the growth opportunities we have. I think also we need to look into our footprint and our cost structure. As I mentioned, I have been leading the operation excellence and the consolidation program within SMS. We managed during these years to deliver and actually also over-deliver on our commitments. During the years of 2014, 2015, 2016, with the volume headwind, we still managed to increase gross profit during those years. I see no reason why that should not be possible also in SMT. Moving into the portfolio. It's clear that we have two product areas that generate value, and we have two with issues. We start with the positive ones. Powder.
The only focus on powder now is to grow, of course, grow with good leverage. I will not destroy your presentation, Annika. You will describe that. Looking into Kanthal. Kanthal without wire, which is now under divestment, is a decent or good business with around 12%. There's great growth opportunities in Kanthal. Of course, I will expect a healthy leverage on that growth, and that is the main priority for Kanthal. Moving into the ones not performing as expected, I start with Strip. Strip. I think Strip is just underperforming. Looking into Strip, there is lots of operational issues, quality problems, lead time problems, output from bottlenecks, et cetera. Of course, there is also a need to refresh the product portfolio, but a lot of operational problems.
So for me, Strip is somewhat of a turnaround case, and I have been very clear with the Strip leadership that my expectation of Strip, that they should be above average on profitability for the business area. Moving into Tube. Tube is more complex, or at least it is bigger. Tube we need to look at from two perspective. We have one very profitable part, the specialized part is the oil and gas, is the nuclear, is the rotary steel, et cetera. There, of course, the focus is to grow. Then we have the standardized offering, which is underperforming. Many of the mitigation action is addressing that question, and I will not destroy your presentation either, Michael, but I think improving cost positioning, and I think also improving, I would say, mix optimization between the standardized and the specialized. That is one of the strategic nuts to crack for us.
Looking at the total. If you love strategic implementation, this is the perfect job. We have some of the businesses with good profitability, good growth opportunities, and there we need to speed up and execute on those. Then we have number of businesses which we need to turn around. As I said before, mix optimization is one of the important parts. I will come back and make a summary after my colleagues has made a presentation of Tube and Powder, but thank you for listening. Michael?
Thank you, Göran. Let us go to product area Tube. My name is Michael Andersson. I am the head of product area Tube. As Göran showed, since the change of the organization, the full supplier of long products and seamless tubulars in advanced materials. Product area Tube is around SEK 8.7 billion on sales, and is directed to 50% towards the energy industries. Naturally, this exposure, considering what has happened during the last years with the falling oil price, traded at $62 today, but being down at $30, 2015, has brought this business into a very low level of profitability, not in comparison with targets, nor with historical proven levels. Obviously, that is my key message here today. How are we going to address this? Especially considering the description of the two bubbles.
Tube is big, and there is one profitable, forward-looking part, and there is also this standardized part that is underperforming. I am the first one to agree with Göran, we were too late on taking actions on that. I will share those actions as of today. There are two sides of the addressing the standardized business. One is traditional cost-cutting. No fancy stuff here. The second one is related to a more proactive and forward-looking activity. We start with the left side. This is the cost adjustment side of the standardized business. We have started a manning reduction. We are aiming for that for the main site in Sweden, in Sandvik, and our biggest site for this organization, reducing the staff headcount with 20% or similar to 210 jobs. The second part is aiming to reduce A&S cost for this standardized portfolio.
A portfolio that is advanced to some extent, but is carrying just too much of A&S considering the type of portfolio. The third part of this is a structural review of the distribution infrastructure. This has so far rendered in a conclusion to close down our operations of distribution in U.K. Further out, we have also launched a spend cut program in the main site in Sweden of 10%, aiming for savings there. I will get back to this. The other side, the regionalization, decentralization, and partnership. The whole Sandvik is going through this decentralization, and so for Tube. One component of that is decentralization on a geographical perspective. Being a big organization, the standardized part, we have broken that down into three regional business units. Why are we doing that? Basically, to enable a stronger accountability for the business.
Being closer to the markets we are serving, making quicker decisions, and taking the responsibility for that business and the result. Second one is around local offering and sourcing. This standardized business is also carrying a significant portion of networking capital. We are now looking, thanks to the regionalized business units, to identify opportunities to find sources of raw material also in the regions, partly disconnecting us from the traditional way of sourcing everything from the Swedish metallurgy and the melt shop. At the same time, we're looking through the go-to-market models, very much changing from a perspective of a go-to-end customer perspective, going more on this standardized portfolio for a mill-to-distributor model. This is also one of the reasons why we have made the conclusions about the U.K. operation right now. Finally, I think I mentioned the partnership.
It has been a time when SMT always have thought being alone is the strength, but I don't think that is the truth going forward in these fast-moving markets. To put some timing perspectives on this program, Göran mentioned there has been many programs in SMT. I'd like to give you an update where we are in this activity list. The first part, the regionalization, that was launched in January this year, and we are currently up to speed in all the three regions, in APAC, in EMEA, and in Americas, with full business teams and business leaders taking the responsibility for the business driving the needed actions further. We have also launched that cost adjustment in the main site in Sandvik. We launched that and communicated it at the 21st of August.
We just finalized the negotiations with unions, meaning first redundant employees of those 210, which we are also reaching according to our ambition, will start leaving the company already now in quarter four as we are speaking, where the majority of those 210 will leave throughout quarter one and quarter two, and a small portion also in the second half of 2018, realizing the savings identified in that part of our activities. Finally, the supply chain and go to market has already started. As I mentioned, the first out was the identification of what we need to do with the distribution operations in U.K., but that will continue, especially for the European business. Finally, the last part of this short-term program is the local portfolio adaption and partnership for regional material supply. Having said that, there is not only the standardized part of our business.
I would like to take a chance to make a comment about considering our exposure to the energy industry, and especially the oil and gas industry. This first picture of the oil price development is nothing I need to lecture you about. You're all very well aware of that. The fact is that this is something that we look on as a macro indicator, telling something important for our business. That is not the point here. I would like to make yet another point, especially towards our subsea business in umbilicals, and that is the fact that even though we have seen this price fall in especially crude oil, we have continued to see a steady flow of projects going all the way to awards when it comes to gas field development. That is important for us, because that is also a part of our business.
If I look at how we look at the consequence of the current situation for oil and gas, for our sake, for the Tubular business, the subsea is seeing, for us now, a slow recovery after the cost adjustments in the supply chains, and I will share a few pictures on that, more specifically on our umbilical business. The conventional onshore, very much focused in Middle East. For us, that means advanced oil production tubing. We do not see that coming in growth the coming two years. Forward-looking, it will be a moderate activity for us. No record years the coming years for our oil production tubing. From 2020, we see a pickup of that. Downstream is maybe the good news, and that is something that also gives us some tailwind for the standardized business.
Here we see a change in behavior from refinery side, petrochemical side, where going back to practices around maintenance and investments are looking better. We see that in our order intake through quarter 2 and quarter 3, telling something about increased prices and better mix after a period where that has been very tough and very hard when it comes to downgrading on materials. All in all, it's not only about the oil price for us, it's also about the dynamics of the gas field development. Very much more related to national interest of power generation supply. This was a picture shared with you, those of you that participate last year in the Capital Markets Day. This is a picture of our project funnel, or our picture of the project funnel for subsea umbilical projects. It has two characteristic.
One is the development, the funnel perspective from design, tender decision, and award, and the other one is the type of natural resources we identify in those projects. Behind all these bubbles, there is a named project in a specific geography. The blue ones are gas development fields, the orange ones, they are the oil fields, and the gray ones are oil and gas mixed. It made sense to share this last year, considering the uncertainty in the industry. Of course, it was very unsure how much would be landed from a Sandvik point of view during the year. Today, we know the answer on that. This is the updated version of the same picture, and we can first make three conclusions from this.
The first conclusion I make is, thanks to the very strong position we have in this specific industry, we actually managed to capture all the important projects, securing a good load and revenue going forward. Last month, we announced to the market also that we were awarded the second-largest umbilical project ever, which was of course, really nice. The second part is also about this. We see that even going forward, there is a healthy funnel of projects that will not be the best of years, but it will definitely not be the low point either, considering how it looks. Both big and small projects are in the funnel and are expected to pass through the project funnel. Of course, the last point to make here is related to the relation between gas and oil.
Once again, we see that the majority of the bubbles are blue bubbles, that tells us something about we will continue to capitalize from this development of securing gas field development for national interests. That is important part of our umbilical business. Making the last comment, making a few words about our niche products. I actually brought two of them with me. Some are really big, so I can't show them, but these are two very interesting ones. Now, there are great opportunities also looking forward. As you remember, there's one part of product area Tube that is profitable and should grow. I start with this example. This is a control line. Control line is a niche product.
Funny enough, during this crisis in the oil and gas industry, there has also become a very strong push, of course, for cost efficiency, increased lifetime of wells, higher integrity of wells, and because of that, also movement toward smarter wells with more intelligence and more control. Our product, the control lines, which is actually an encapsulated set of stainless seamless tubes and some electrical cables, and could also be optical cables. This is the nerve system between the software, the topside, and the bottom of the well, how to connect these two entities. It's an extremely important component, and we have been very successful in expanding the business of this product. The way we do that is through small investments, very capital efficient in key regions, offering the oil service companies a way to find a standard for a high-quality product, but with a local presence.
We started this in Brazil. It was a success, we're now expanding that towards other key hubs in other regions in the world. The second example I will show, and then my time will be out, I think, is a digital tube. For you, it looks like a normal tube, I suppose, from the distance, but this is an innovation. Imagine a tube with integrated sensors. This is a seamless tube with integrated sensors capable of capturing real-time data in any industrial process, may it be a heat exchanger in a refinery, an umbilical, or a steam generator tube in a nuclear power plant. The innovation is, of course, partly the technology, how to integrate sensors into the walls of a tube. The second part is naturally also the business model we are looking at capitalizing from here. It's not the product.
This is a service for us. This is a way where we can offer a way to optimize processes for our clients. This is just about to be launched. We have it in trial for a couple of commercial sites, and it has shown really good results. I'm looking forward to what this can bring from a growth opportunity, and I will place them here. You can take a look at them afterwards if you'd like to. By that, I would like to say thank you, and I hope I helped you to see a little bit more about what's in the plans for Product Area Tube, considering the challenging situation.
Now we're going to talk about Powder. Welcome, everyone, or good afternoon. My name is Annika Roos, and I'm Head of Product Area Powder. This is a new Product Area within Sandvik Materials Technology, and also the smallest one. Since this is a new Product Area, I'm also new in my position, and I started in this assignment in September earlier this year. I'm not new to Sandvik. I've been here for quite a long time, starting more than 30 years ago, and been in different positions in different business areas along that time. Powder technology has been part of Sandvik since the end of the 1970s. While this is a minor part of the business, we also see a very interesting growth in this area.
Metal powder market is growing in more than 10%, That's why it's a very good business for us to be in. We heard earlier Fredrik Vejgården from SMS talk about additive manufacturing and the opportunities that we have within Sandvik in this area. The powder from my Product Area is a very important enabler to make these plans come true. What is it that we really do in Product Area Powder? We sell and produce more than 1,000 different grades of metal powder. Of course, this is a very good platform for us to grow from. My assignment is to grow this business as quickly and effectively as possible. What part of the market is it that we are addressing? We can divide the powder market in ceramics and metals, Here it is the metals part that we are interested in.
Metals part you can divide into different segments. We have low alloy and tool steels, That is not what we are interested in. We are focusing on the advanced alloys and stainless steel areas. Here we find alloys based on nickel, cobalt, titanium, Of course, also stainless steels. Well, advanced stainless steels, That's where we today are market leader. This segment can be divided into different type of powders. We have coarse powder that is usually used to produce near-net shape components with a bit of larger sizes. There is fine powder used to produce near-net shape components of very, very small sizes. Then we have additive manufacturing that is a little bit in the middle area there. We can supply a powder for all these type of areas.
To do so, we have three different sites, where the biggest one is located in the U.K., in Neath, where we primarily produce the fine powder, which is a specialty. We also have a plant in Sandviken in Sweden and also in Surahammar. As you see, the different type of coarse, fine powder and also powder for additive manufacturing, we see fairly good growth numbers. Powder technology brings a lot of value to customers, and you can see some examples listed in this slide. Here we have seen examples of drastically reduced lead times. We see reduced production costs, and we see the possibilities to produce designs and material properties that's not even possible to produce today with conventional production methods. Of course, our unique metallurgy will be a very good asset to develop new alloys in this area.
For our customers to be able to utilize all these advantages, they need to process the powder. Then there are different type of processes that you actually can use. We talk quite a lot about additive manufacturing, and that's only one of it. We also see metal injection molding, spray forming, and hot isostatic pressing. Different methods that are used to produce components. We provide powder for all of these type of processes. The focus is to grow our external business. We also have a very important role internally to help different product areas within Sandvik to develop powder technology also in our own processes, to benefit from what the powder actually can offer. What I need to do to accelerate growth and to maintain our leadership is summarized in these four bullets. First, we need to expand capacity and also build further capabilities.
We need to do more of what we're doing today, especially in the stainless steel areas, we also need to build the capabilities, knowledge into new areas. Here, one of the focuses is titanium. This we need to do organically, we also need to explore our opportunities in partnerships and acquisitions. Together with the additive manufacturing product area in SMS, we need to continue to build competence in the additive manufacturing area. Also, as mentioned, it will be very important for us to build up the knowledge and our internal capability to use the light powder technology also in the other product areas within SMT. With this, I would like to thank you for your attention, and also hope to see you here in a few years talking about the fantastic growth story for powder.
Thank you, Annika. To summarize the SMT part, it's clear and you all know it, our financial performance is not at all acceptable. I think it feels good to say that here now, because I think we have a lot of opportunities going forward. I would be much more worried if I saw that everything was in place, that everything was managed in the perfect way. I see that is not the case, and that's where I see we can improve a lot. We will focus on, as I said earlier, commercial and operational excellence. Here I see that the new decentralized organization is one of the most important enablers for that, because I will expect nothing more than that we deliver on our commitments. One important strategic matter for us is to shift our business into more profitable mix.
That's, as I said before, quite an interesting nut to crack, but I think we, in the discussion, have some good ideas how to do that. My main focus and the main focus for my team is to improve the way we execute. The focus will be strategy execution going forward