Earnings Call: Q3 2016

Oct 24, 2016

Greetings to you all, and welcome to the presentation of the results of Sandvik's report for the Q3 2016. I am Arthur Timord, and I'm Head of the Investor Relations Department, Sandwiches. And I will guide you through the Q and A session later on. But before that, we're, of course, going to run through the presentation managed by introduced by our CEO, Andrew C. Guyan, and our CEO for Sumatiliator. And please go right ahead. Thank you, Anssi. And also from my side, welcome everybody to this Q3 report. You have to excuse my voice. I lost it during the weekend. So if I notice during the day here, I'm sure Tomas didn't give me a hand. Hope so. Yes. Good. Thank you very much. Yes. The 3rd quarter, I'm pleased with the development of Sandvik during the quarter. Despite lower sales, we managed to improve both the earnings as well as the margins. We also see saw a stabilizing development of our order books. And we had during the quarter the highest cash flow, to the record run for the Q3. The change in our organizational structure was put in place here 1st July this year, and the development during this period has gone very smooth. It has also been an exciting quarter in relation to new product launches, and we will come back to that a little bit further on. The market stabilized during the period, and both Europe and North America was flat, and we saw some improvements in Asia. 2 segments developed very well. That was the mining segment as well as the aviation segment. But we still see challenges in the oil and gas industry, even though potentially it's pretty light. On the order intake, I think you see a stabilization. And now if you're looking at the last 5 quarters, you can actually see that the level has really stabilized. The revenues is still going down, and this quarter, we had 5% negative. And on the profitability ratio, we were just on lag. Yes, the competitive side that we covered was very much related to the EBIT development, which actually improved in a tough normal market environment with an improvement of 13%, and we reached 13.2%, which is a good number for beating Q3, which traditionally is a challenging quarter for the company, a lot of the patients during this period. And this is mainly driven by our cost efficiency programs that we announced earlier, but also very stringent cost control during the year and the period. Starting up, this is our 3 business areas. Sandeep Machining Solutions, I think, continues to show strength. We saw the market continues to be challenging with the 4th year 4% down in price volume. If you're really looking at the underlying numbers here, there are some effects of this 4%. And one is we had a little bit shorter days, which affects about 1%. There is also some tough comparables in Asia and Europe on the order side. And the 3rd effect, which is a third percent, is related to the Wolfram business, which had been moved into the machining solution. It is a much more boilerplate in orders. And this quarter, it was significant in Norway. If you look at the business without them, it's about 1% down. And of course, all the activity continues, especially with the supply chain authentication program. We continue to work with the closing of the factories, at the same time, putting a very stringent cost control over the business. And I think 21% is a good number for machine installations, which is what's right in this period also is that we have launched a number of new products in the IMTS, the biggest addition in Chicago. And this was actually the 1st intelligent tools that we introduced through the market, and we are unique to this. So I'll try to show you a picture from the products. So this new line of product will help our customers to become more productivity and it's taking the first step into the digital trade market. And these products are very well received in the market, and we believe that this will be the future in the drilling market. And moving over to the mining and rock Technology. I think on the market side, we've seen the best improvement. We can see that the order intake is at 5% compared to last year. And this is mainly driven by the equipment sales. The aftermarket business is pretty soft. We had some good orders coming in during the period, both from Canada and also from Australia, which have had the numbers in April. Also in the mining business, we have introduced a number of new products, and this is more related to battery driven and doorbell. So I also have a small thing here. Juan has his sunglasses on, please put them on. Well, it's always exciting to introduce new products. But during the mining expo in Salcedas, which is a mining show, which for our early 4th year, this whole new range of battery driven drill rigs and loaded work percentage, all also very, very well received in the market. And this helps many of the mining companies to reduce their ventilation costs by not using diesel engines underground. So let me move on. Sorry, I think we have also then come to the material technology, the last business area. In material technology, we still have a very stable development. You can see on the order side, we received big orders from the oil and gas industry from BRL350,000,000 and certainly came in at a good time, supporting the oil and gas industry, which have been under pressure for a certain time. Otherwise, I think we continue to work hard, keeping the cost under control. And we, during the quarter, had a EBIT level, underlying EBITDA of 5% and then adding the net interest surcharges of incident up to 6.7%. And I did the work to you Thomas and give us a little bit more in-depth when it comes to the numbers. Yes. Okay. Thank you, John, and good afternoon. Let's jump straight into the financial overview. And as you heard, the order intake was flat this quarter and essentially a black here around it, 0.2%, plus 1.2%. And this is the first time in a couple of years after we have an order intake, which is not declining. Revenues were down minus 5%, of course, given the negative order decline in the previous quarters. The EBIT came in at 7.3% compared to 11.2 percent, a little bit more than what we're very happy with. The increase in the margin and in numbers, up 13% in numbers. Working capital improved year over year, and cash flow was record high. Just a quick note return on capital employed. The return on capital employed numbers that we report are low in 12 month numbers. We might change that going forward. But this quarter, we have quite an improvement in the terms on capital employed, which is to get this quarter by itself. Earnings and stuff, it has to be raised itself. Okay. So let's take a look at the bridge. 5% down on the top line meant a decline of €114,000,000 on management. Trading programs, plus €119,000,000 So the net of those 2 was plus €60,000,000 Currency, plus €2,000,000 and change in net cost effects, the bridge effect was €180,000,000 So that's the journey from €2,300,000,000 to €2,600,000,000 or from €11,200,000,000 to €11,800,000,000 So let's take a look at the accretion and dilution in the bridge, starting with the Volcanoes pipe, which means just the pure volume and the savings programs. 95% means €950,000,000 down on the top line, but we averaged up €60,000,000 And we had really good performance in all business areas, especially in SMS. SMS was really outstanding for the time. Currency was 63,000,000 minus LNG from the order time traffic switching from the EBITDA. Now we have guidance minus €60,000,000 for the quarter, and that guidance is for transactions and transactions. And believe transactions and transactions came in at close to €72,000,000 The rest of the bridge effect on the valuation, the revaluation will offer margin margin for that. The net method anyway is SEK62 1,000,000,000. Have had a big negative effect a year ago and we have positive effect, so 196,000,000. Now the important story is that it's 210 big. And even if you have the currency effect SMS is doing fine in the FMC, the orange rock, which we get caught after it's perfectly fine because what you really see here is the back of cash flow boxes. We have a few of them as a way where we don't have any this year. So Q3 was 2 years, so Q15 2016. This year in 2016, Q3 was even better with 4.3% versus pre operating cash flow. And of course, if you have an improved earnings, you have reduced risk from working capital and if you have the flat CapEx, you can put cash on cash flow. Net debt has been down with 7% compared to a year ago. The cash management net statistical rate part of the corporate here in the bar. So it came down even more than 14%. And what happened was that the discount for us and for everybody else came down, which impacted the pension. Now the pension of the pension is not a thing about future which litigation is discounted to those lines. And this goes up and down with a couple of billions for every percentage unit of discount rates that's happened now. So this will go down eventually when the discount rates comes up. Important thing is that the financial net debt, it continues to come down. Net tiering and net 0.95 percent, so we're back to 3 dividend levels from Q1 despite the fact that we had that we have in that financial liability. To finish off with some outcome and guidance. And currency effects, that's plus NOK2. We guided minus 100,000,000,000 I said minus 50,000,000. We guided minus 100,000,000. Looking price effects, we were plus €51,000,000 We added plus €30,000,000,000 So it's fairly close. And for the 4th quarter, we guide the currency price of currency price effect of €200,000,000 transaction translation and we guide €60,000,000 for the net price effect. Tax. If you look at full year numbers, CapEx, we keep guidance of 4.1 or less. If you look at the run rate, we are not on 4.1% right now. We are lowering that. So we might or we'll most likely end up on something below 4, but we keep the guidance as such. Net financial items, though, we have taken down from 1.7 to 1.9 to something between 1.6percent1.7percent. And the tax rate looks steady between 26% and 28%. Thank you, Thomas. To summarize a little bit, yes, the market continue in the most segments that we are operating to be challenged, and even if we see an improvement in the mining sector, we still believe that this will continue and we need to continue to focus on efficiency improvements and stringent cost control even in the coming quarters. We have also been moving slightly forward to a decentralized structure continues, and we are continuously moving resources essentially out into the operations to build up accountability and the entrepreneurial spirit that we would like to see in San Diego. And I think we are moving very well according to our plans. But the last thing I'd like to mention that we are very happy that once again, we have been included in the Dow Jones sustainability index and that we will continue to drive our fair sustainability purpose in Hamburg also going forward. With that, I think we end our message. We move over to questions and answers. Yes. Sure. Absolutely. I think it's important to see improvement in the mining market. The development of the NOFA basis have then gone up during the last, let's say, 3 quarters slowly. And this has mainly come to gold prices, silver prices and also zinc. Safety. While we have seen much tougher solutions in graphene, iron ore and coal, so that's the part. So that's the part. And we have seen mainly in the business on the equipment side, especially on the underground, where we see the best improvements. The what's the production side, it's you compare year to year to year to year down but if you look at percent, it's a bit less. It's still the oil stabilizing around the 50 the following. And we've seen in the midpoint of delivery go up. If you look from 1 year back, it's actually after 30% and then I think we are at least 50% sequentially. But we haven't really seen those yet in the numbers from that point. Really a increase in the mining rock tools. So aftermarket, that includes the cruise of the service and the airport that has been pretty flat the loss here and potentially. Dorel, last year, and also as part of this heavily, heavily in red at Saikon Securities. And now you see this trend in North America, the rig coming up quite a lot since the end of 'nineteen. What do you think is needed in terms of help from the market for you guys to be back in flat to yields on that because the cement in SMRT? That it has been missing money. That, of course, includes also the so that's from the otherwise, the shipments, it's not still somewhere. We've had indications that things are looking a little bit right to go, but I think it will activate to the next month in the quarter to see the effect. But it's correct. I'm always operating at the moment and actually, that should be some demand also for our product. And we have another question from the Wound Hearing Stock Company. Sandeep? Yes. Anders, it's Sebastien Perusat. Could you elaborate on the machine installation development in the various regions? How you perceived during the quarter and what you see now in October? Right. I mean, if you look at year on year, North America continues to be a challenging market. That's actually no big change from what we have communicated there before. So I would say Europe pretty bad, somewhat up in the Chinese region. And then we are actually down in North America with 6% with quite sustainable and substantial. So that's not really a big change in that. That continues to be a tough. And if you look at the different segments that we operate, the aviation is doing very well. On the automotive side, which has been flattening out, probably a little bit down for us during this year. And we do not really think that it is stopping more cautious among the automotive industry on the other side there. Then if you're looking at it's only 2 weeks, obviously, on the 2, 3 weeks on the quarter, So no big variations from the average from previous quarters. So I think that's moving on in the same pace as we've seen earlier. No big changes. Can I just clarify there that we haven't seen any change from that? This is the 10 months and the seasonality in the quarter, I think it's a valid point. Okay. Just one follow-up on Finesse again. You said the margin was 1% higher than last year due to what you had destocking. Do you produce at the same level of sales? If you look at the business last year, I mean, the result was, I mean, lower than we normally had during the 4th year. So I think we had 84.1%. So there, I think during Q3 last year, we had a good G14, which we tested. But this year, there is actually no change. We are running it, as we said, but not affecting actually any improvement of the EBITDA decrease of EBITDA due to this quarter. So it's more a big shift from now here. Thank you. I know we have lots of questions from the conference call. So operator, would you please have the first question through? Certainly. The first question comes from the line of Claus Guardian from Citi. Thomas, it's Cars from Citi. Firstly, on the margin Rock Technology. If we focus on the mining side, if we try and split out between equipment and aftermarket, the margin in equipment improved last quarter. Was it at a similar level this quarter? Or have it improved further and roughly top level, please? And if you could say how the margin developed in barrel and construction in the quarter? Yes. I'd actually say we normally give any details on the equipment. We've been transparent in a way to say that the equipment margins are lower. What we mentioned on specialty in the last quarter that we had, I think, one order where this was related to lower margin. But I think the quicker margin is pretty stable, no really changes on that side. On the aftermarket, also the margins are pretty stable, No big changes, which is very much also related to the volumes that we have seen there. So no big changes there either. On Amarell, I think I mentioned that part. If you look at year over year, yes, it is down, but potentially it's pretty flat and not so much. Construction, no big changes at all, I would say. Okay. Great. We can actually see that I mean, we reached 10.5%. That is, of course, including in a 5% lower market, 5% to 23% compared to last year. The reason I asked you is because last quarter, you said that the equipment in mining improved over the quarters. I was just curious whether the equipment margin has improved yet again in order to be stable. Yes, I think it's pretty stable. No big changes in that. When you get more equipment orders, of course, you have better margins on the aftermarket. So if you have a bigger sales of equipment, that's the leads to some of the total market, of course. That's how it goes. Now when we merge together the as I said, both the mining and construction part, I think our aftermarket is approximately 65%. Before, we were over actually 70%, and we were talking just on the mining side. So it's a little bit less because we know that it's somewhat lower aftermarket in the construction business. Yes. My second question is on exploration, which is now improving. Pricing on rock tools have been an ongoing issue. Is pricing also improving this quarter? And if you could tell us about the aftermarket, where you now say it's largely stable versus stable last quarter. How did the aftermarket in Mining develop year over year and quarter on quarter? As you can, on the as you say, aftermarket in general, it is stable. It's somewhat negative on the on the consumables, which is, of course, also related to the vanilla business. And on pricing or off sales? Pricing, what is it, it's pretty stable. So that's an improvement versus last quarter? Yes. I believe we've seen, as we mentioned earlier, we've had a little bit down during some quarters, but not to change it. It's somewhat down, but not much. All right. Perfect. My final one is North America. Simply, being the case, stable demand in the Q1, I guess it's been a biggest concern for you as of late next to direct coal and gas. What do you see in North America as the project progressed if you look at general engineering, automotive, mining, etcetera, if you look at how the project progressed for each segment in North America? Yes. If you look at overall, we said we have a stable in Automotive, but that's also related to the we had a big order in the mining segment up in Canada, which helped the numbers up. If you look at North America in general, I think it's more down. And I think if you look at the SNS business, you're actually down 6%. So North America is still the worrying part. As it relates to the market segments that we are operating. Aviation, as I mentioned before, continues to be very strong. Automotive is a little bit flat, even though our sales possibly dipped down during that part. General engineering if you look sequentially, it is pretty flat. Also, if you compare to last year, you guys have more flattened out, it would say on that part. Mining is up. I hope I've got the other segments. You have to set this on this one. That's perfect. Thank you. Thanks. Thank you, Charles. Operator, can we have the next question please? And the next question comes from the line of Graham Phillips from Jefferies. I thought you could just focus banking on SMS, please. When we look at the North American development, minus 6%, and you saw automotive, but I believe auto production was up about 3%. Can you talk a little bit about the competitive and Amitabh was the new CEO in the business there, and he's indicated that he's prepared to use pricing to retain share, which they've lost a lot of in the last decade or so. And also what's happening technology wise in terms of substitute materials, competing materials to the cutting tool business? Yes. I mean, there could be a lot of things here that have been affected. You see, as how we see the automotive industry, it is pretty flat during this period, even though our sales have been little bit less. We do not see that as the market share decreased or since we've had more and more cautiousness in the buying procedure from the Alpena industry because it is taking off a little bit from the improvement that was previous. Then we I mean, we all know that when the Altoona goes into other materials going into that we did and so on, that affects, of course, our business negatively. But I don't think this short term, you cannot see not actually seeing those effects. I think that's more related to the brand behavior at the moment. Okay. And then just a little bit about Asia. Because again, I think there had been expectation of some good growth in Asia for machine solutions, but we're seeing orders slip in there further. What are the dynamics in the Asian Machining Solutions market that, again, they're causing some underperformance there? I think when it comes to Asia, I think the processing side there at the automotive continues to be very strong as well as the aviation side. The negative part is actually related to the oil and gas industry. Rest of it is very flat. Okay. But just also on the competitive issues in the U. S. I mean, are you seeing China Mattal a bit more aggressive? They've obviously changed their distribution method as well to use more independent, so there will be more of their product coming on the shelves of the distributors. I think the whole country market is a competitive market, and there is a lot of especially when the volumes are not going up at this time. So of course, there's a lot of players, a lot of ones that have a piece of the market. We feel that our market share is stable. We do not see any actually any decrease in prices rather from that positive on the pricing side in mass. And again, I didn't get to see the video because I'm on the phone here. The digital tool market, how big should that be in terms of new product? What percentage of sales do you envision that contributing to the division? Yes. I think this is at a very early stage. I mean it was quite unique that they are presenting tools that we can actually communicate and in the future they have with customers. I think it's going to take a number of years before we see any significant big sales of this. I mean, it's a lot of opportunities in our work connect the machine builders with the tools, with the digital opportunities and help our customers become more productive. So the interest was huge during the exhibition. But if you look at that part of the market, it will, of course, raise more. I think you need to wait a number of years to see what is. We will continue to launch new products within this area. And eventually, it will become an important market. Thank you. And operator, again, can we have the next question, please? Certainly, the next question comes from Markus Alwy from Kepler Cheuvreux. Please go ahead. Your line is now Kepler Cheuvreux. I'd like to start with just a clarification of the answer to Claus' question in North America. Just to look at underlying demand, you say there's more down than anything and that you mentioned minus 6%. If you look sequentially, we look at just demand. And I know that you said you were sliding your business 2nd quarter versus Q3. Do you keep sliding in terms of demand? Or is it fairly stable sequentially? Can you just clarify that for a start? I think we see that stable. I mean, sequentially, it's stable. And what we are measuring, of course, when it's 1 year back, and it's down. But sequentially, we see that pretty stable. Okay, perfect. And then on the line replacement side, can I just ask, sir, the type of orders you're getting on the equipment side, is it mainly replacement? Or are you seeing some new projects coming in as well? If you could just talk a little bit about that. I think it's a combination of that. But of course, all equipment in the mining business can come from the same as wear parts because they have a certain lifetime. It could be 5 years, it could even be up to 10 years sometimes. But as all the equipment becomes, the more expensive they are to maintain them and keep a level at a strong competitive run. That means that you need to continue to replace products. And I mean, if you look at last year, we still have the pretty good orders on treatment. I'm quite surprised that we got that much orders in that period. Now it has accelerated a little bit, and we received some really good orders from Australia, as I mentioned, but also from Canada, mainly in relation to underground mining. Do you have any idea of the average age of the fleet out there that you'd like to share? Yes. We had them. As you know, we have a lot of data about the equipment. I don't know them here at the moment. But sure, we know all the equipment that are out there, how they are operating, how much consumables they are consuming and so on. So that data is available. And we'll get a chance to see if we can put something together. I will see if Antti can get something, then we can get information later on. But I think the fleet, it varies a lot. I think we said last time that we have around 8,000 operating units at the moment out there. And of course, going back 3, 4 years or 3 years ago, the demand was enormous, was very good. And then this has cooled off and we did the last few years and now it's stabilized and compacting a bit. So that's how the money market goes. Right. Thank you. The next I have just two quick ones for me, please, one for Bjorn, one for Thomas. Bjorn, just on your SMS business, I'm actually most interested in Europe. You're down 4% in the quarter. You talked about tough comps. I'm not quite sure I understand. You were down 5% last year for SMS overall. You have apples to apples comparison for Europe, but it looks like quite a weak quarter for Europe. Can you comment on whether you see any meaningful monthly variances? What did you see in September? I think there was a comment earlier, was it from Nancy that talked about Observatory, can you just verify that particularly? And what you've seen in Europe quarterly, Jay, that would be helpful. Thanks. I think on the Europe side, it's not quite right. What I said, I think it's pretty tough there. We are not actually down in the volumes in Europe. It's pretty stable. And I said, the 4% we talked about, we get better than Trojan estimates, and there was 3%, which were affected by shorter working days or comparables as well as from the bolt on business, which was significantly lower during the quarter. Otherwise, I think we said more or less that stable there and a little improvement in China. Okay. I can't quite move that. Move that one. You told the bulk order in Germany, how big was that? What was your side as you bring up that? Bulk orders from last year, you mean? Yes. It was about 1%. Okay, fine. Just a quick one for Thomas, if I can. The group cost time was 154 in the quarter. That was lower than I think expected. Why was that? Did they come back in Q4? And is there any change to an annualized level around €900,000,000 for that mine in Europe now? It was a bit low, yes. But I mean lower activity level, etcetera, etcetera, yes, it's still in pretty good ones, etcetera. So for the Q3, we keep the guidance on 2.50%. So no change on the annual run rate, I hope. Thank you. Can we have the next question please, operator? The next question comes from the line of Andrew Wilson from JP Just a couple of quick questions on SRS again, I'm afraid. Trying to say, I think earlier you mentioned that pricing was still positive in SMS because of how far that was right. And can you talk about it by region, please? Yes. I don't have a strategy for region, but pricing overall is slightly positive. Okay. And a similar level that we saw last year or what that's going to be? That's compared to last year. Okay, fine. And just on the Aerospace, you referenced a number of times that Aerospace has been relatively strong, which sort of feels a little bit odd with some of the new store coming from that segment. Can you talk about whether that's a market share thing or whether you might expect that to fill down into Q4? Yes. I mean, we've had a pretty strong aviation business for quite some quarters, and that was also during Q3. So stronger development there, and that's also related to North America as well, Europe as well as China on the part. And the question was on the other can you repeat the last part of the question? Just how you might see the aerospace demand developing into Q4 given the new flow in the sector? Has it just been particularly positive? I don't think we've given any guidance on the development today in the Not for an outlook from it. No, we don't have an outlook from that either. We don't see any big changes, I think, due to what I mentioned. It seems more strong and pretty much in the 15th average of the previous quarter. Okay, perfect. Thank you. Thanks. Thank you. Can we have the next question from Peter, please? Next question comes from Ben Caslin from Morgan Stanley. Please go ahead. Your line is now open. Yes. Good afternoon, Bjorn, Thomas and Anthony. 3, if I can. Firstly, just on SMT, where you won a large order. We haven't seen many of them over recent quarters. So how does the pipeline look from here for when you first large orders, both on oil and gas and the nuclear side is the first one. Yes. And we're very happy that we received the order. I think if you look at the order book we have today, it's in line with what we had even a year ago. So we continue to get these orders for umbilical, which we are very happy for. You all know that I mentioned last time during the Q2 market day, we were a little bit nervous to how we developed because of the challenges involved in the industry. And during, I think, last quarter call out, it came out more positive that the pipeline looks good, the streams of growth. And there's no change on that. It looks pretty good. And of course, you need to close the order, confirm it correctly to materialize, but I think the pipeline looks okay. And just to follow-up, I think you said before that the backlog on the umbilical side lasted into next year. I mean how I think, yes, I mean the average backlog is around 6 months, and I think it's up over the last year today also. Great. Just on mining, you mentioned large orders, 1 in Canada, I think 1 in Australia. Now mining systems has gone. What is a large mining order for Sanddep? Are you trying to signal that perhaps the Q3 demand is unsustainable because of these one offs? Or you've got other large orders in the pipeline that can come through and maintain this order rate? I think when you look at equipment orders, there are normally pretty big factors. There's not so big changes. You don't normally get one here in Mande. It gets 5, 10, maybe up to 20 units. So there's no really change in the patterns how we get the orders. I know, of course, that is a little bit more challenging on these new trigger orders and when they're coming in, that's a more normal pattern to how oil shop is placed. And I think we have a good pipeline there also. But like everywhere else, it's competition and we need to close them and the projects have to materialize, but it will help you. Got it. And then just finally on SMS. I know flexibility is low on the business. Just to clarify, if you look at the Q3 comparative, obviously, less working days and tough comps from Wolfram. Are you looking for Q4? How does it look from a day's perspective? And then is there anything we should be aware of from Q4 last year that would make that a particularly difficult or easy comp? I am asking, does that 2% drop out in Q4? I think I mentioned already a couple of times that we don't see any major change in this quarter. Things are moving on pretty much in line with the previous. There's no big evaluation that we need to communicate at this time. It's correct. I mentioned those 2 reasons why the I think the orders were down 4%. I mean, you can take a guess what it is. In the end, it is 4% down if you compare those. But the underlying is a little bit better. I don't know if I missed anything that you asked here or No, no, that's everything. Thank you. So thanks. Thank you then. Can we have the next question please? The next question is from the line of Alexander Vrbo from Bank of America Merrill Lynch. Please go ahead. Your line is now open. Hi. Thanks very much, gentlemen. So a quick couple of clarification ones, please. Thomas, would you mind just going back over the reason why your FX was positive on EBIT contribution? You mentioned that your underlying or under the translation transaction numbers actually pretty close to the original guidance, but the line was when you gave the reason for paying a positive SEK 60. Secondly, I think you talked about a lower central cost number earlier on. But if I look at the operating income and the P and L, that was also positive compared to a headwind last year. So if you could just explain why that what the swing was there and whether we can expect that going forward as well, that would be really helpful. Thank you. Okay. So that's good. Okay. The FX, we guide only for transaction and translation effects. That's the only thing that you can predict with some kind of certainty. But the valuation effect is, I mean, you may know. It depends on whether you pay this or this is a payment or not at the day you close the quarter. So the transaction translation of FX effect in the quarter were minus 1000000, 72 euros However, in the bridge effect between the revaluation now end of Q3 2016 and end of Q3 2016, and a big positive number, which takes all the way after close 'seventeen. That was for it. I hope you have asked. Okay, great. And just was that in SMS mostly presumably? Or is that in positive group? Yes. Positive SMS, yes. The transactional and translational negatives, the Mine 72, it's very much a story about exports or mining exports, countries where they don't produce, whether it's just sell, whether it's trade companies. So it was very much South Africa and the Kazakhstan this time, on a major transaction side. But the other evaluation, yes, absolutely right. That's a mess. Then the other question was the second question. Was the pension cost or was it other operating income? No, it's the other operating income. So I think last year, you had negative 115,000,000 this year, it was +89,000,000 I just wondered what the swing was. Yes. Well, now it's becoming difficult. But it's actually currency again Because you have 3 currency effects. You have the transaction effect, you have the translation effect and you have the revaluation effect. The transaction effect and the translation effect, that's all over the place. That's on every line in the income statement, wherever it appears, wherever the currency flow is. The revaluation effect is accounted for in other operating income. That's what you see there. It was a big negative a year ago and somewhat slight positive this year. So that's the difference. But up on the end, we had paid back the end. You're seeing the best of that operating. Okay. Understood. And final one, if I could, please. You had a little bit of an acceleration of savings. Is there any indication what that might be for Q4? And if I might just ask, if you look at the Q2 report for mining and construction savings, the annualized impact on the new SMRT looks like it's smaller, but maybe I'm just missing something in the consolidation there. Can you explain that? No, I don't think we guide. We won't guide for future savings in Q4, sorry. Just go back to that once the quarter is completed. The next question comes from Andreas Koffi from Deutsche Bank. It's Andreas Koffi from Deutsche Bank. So a few questions on S and S. I want to ask Dan's question in a different way. So you had 3 percentage points negative impact on organic growth on working days, both from and bulk orders. So what's your comparisons that you need in the 4th quarter? If you assume demand remains flat quarter on quarter, what would the year over year impact be on SMS? Get that. No. We didn't invite that into the Q4 on the We don't have any specifics of that, as you mentioned here, for the Q4 for now. Okay. And then on 3 d printing because we are now seeing things moving in this area. So it would be great if you could just give us on what kind of risk and opportunities do you see for SMS? Yes. I mean, 3 d printing is an area which we have been working with a lot during the last years. We have a 3 d printing center up in Sandvik, and we are learning everything, but what's possible to do about that. It's true that using 3 d printing would be net profit, but at the same time, increasing grinding and it's happening also in the heating phase. Probably, I mean, if this is going to be huge or in every part, of course, it will be affecting us. I think today, it is being used in certain niches, and that's how we use it also in a certain part. And then I think it's still so minor that it does not really affect the market yet. However, it will be in the future. That's too early to say, to be honest. But sure, we are working with it and it's a good way to use for certain components which are more difficult to make and we have very small quantity for it. In the end, it's always going to be to achieve the most efficient way to manufacture the components. So I don't have any real insight on that part here anymore. But may I ask how many people do you have now working in the developmental research within 3 d company? No, exactly. I mean, we have a team. I think we have 3 machines, and we're not only doing components for ourselves, we're also doing for others. It's becoming the talk of the town that we have a good knowledge in this, which means that customers are coming to us and asking if we can solve certain difficult issues for them, working both with a very defined and then manufacture it. But of course, it's still on a very, very small I think it's an exciting area and more for us in the manufacturing, though, the possibility of making tools in complicated tools, I would say. So we will probably be using this in a certain amount of our production. We might even extend that business to work this way a little bit. We have a lot of material knowledge, we have a lot of capital knowledge, and we'll see how we can do that in the future. The MS overall, 25% in front of revenues? Or is it the bigger number or the lower number there? No, it's not right. Okay. And do you lastly, do you disclose the order intake mix for Foundrychnine and Rock Technology when it comes to aftermarket equipment? Not from the order intake, I don't. But if you look at it in terms of revenue, 6% to 7% of sales was from the Alta Okay. Perfect. Thank you very much. Thank you. Can we have the next question please? Thank you. The next question comes from the line of Sebastian Hooker from Exane. First question around SMS and seasonality just and the margins. Working capital has gone up in the quarter. You mentioned some FX regulation impact, political impact. Should we see the margin in Q4? Should we have the sensitivity as usual? Now can we see a lower seasonality? And the second question is about your 2018 target beyond. As you said, it's been 6 months since you read them. Just wonder if you feel more confident which you can see that performing year ahead or liking compared to your expectations. Thank you. As we start off with the SMS, I don't think we had on the CapEx, it was I think it was very low on the FX side in the product. See is that you said that there is a little bit of a pressure there. Yes. Sorry. Okay. Sorry, sorry. Sure. On the FX, let's see on the S and A side, we can see the difference between the previous one. We have on the savings, it's €1,200,000,000 We have on the FX, €900,000,000 and then we have things related to previous year, June quarterly, which was 28. So if you add that up, I think we will get to an 18% from Q2 to 20 1. But that's about what it is. Yes. And I'm thinking about the seasonality usually in I'm just wondering about should we have the sensitivity on margins as we usually do for our finance margins would be more or less stable going into Q4 because you don't have this over other production issue. Yes. I think today, it's important to say that they are continuing to improve their performance and their productivity in the company. We have the different efficiency projects that we have announced, but we're also working with improving the S and A costs and other efficiency within the business area. So we do expect, Fatima, on our operations that there should be a continuous improvement. There should be a little bit better all the time, and that's also what we expect from machine solution going forward. And that includes Q4, of course. Okay. Thank you. I think when you look at the Maersk, I think they are driving efficiency within the business very professionally. They are working with their back end sites, with the production units. As you know, we have had, in the last 10 years, a decrease actually a number of inserts that have been sold into the market. That means that you need to continuously deduct your production facilities, at your back end, which are done in a professional way. But we're also focusing on all other costs, not least the F and A cost, which we know is high, but it's also part of the variable market. So I think the way they operate is they're very focused on the front end, make sure that we can have the capacity to become more productive. They work with the cost side and the back side to make sure they're productive. And I think they are improving all the time. And even though the market has been challenging, they have been able to grow the net working capital during this period and deliver excellent cash flow from the operations. So from my perspective, I think that is a great job. And then I'm sure at this point, they are really focused and I think this will continue. And besides compared to 6 months ago when you released them? 2018 targets, I think we have committed our step to ground, and I think this report underlines, I think, that we are moving in high speed in the right direction. So in that point, I think from my perspective, looking at some risks that I mentioned, I'm very happy with the development efficiency. Just as I said today, I mean, we are compared to 1 year ago, 1,200 PPLs. We are 4 70 people less than last quarter. I will continue to ensure that our different operations are being efficient to offset our central costs. And that's the process of moving that out. So I feel very committed and also rest of the operating entities have committed themselves to deliver what they have promised, and we will do that. Thank you. Thank you. The next question comes from Ian de Kallen from Handelsbanken. Please go ahead. Your line is now open.