Greetings to you all, welcome to the presentation of Sandvik's results for the second quarter of 2015. As per norm, we'll run through the presentation with our CEO, Olof Faxander, and our CFO, Mats Backman, after which we will do a Q&A session. Without further ado, I'll hand over to Olof Faxander to start off the presentation.
Thank you very much, Ann-Sofie Nordh. Welcome everybody here in Stockholm and everybody listening on the web to this presentation for our results for the second quarter 2015. To start with, to summarize the quarter as a whole, I'd like to point to some things. Firstly, we had a very strong cash flow in the quarter, actually the highest we've had for five years in the group, and that is basically based on the fact that we've managed to not increase inventories in the way we normally do seasonally in the second quarter in the group. So we have good continued focus on our net working capital management. The earnings grew quite significantly compared to last year. A lot, of course, driven by the strong positive currency effects that we've been seeing now for a couple of quarters.
This quarter we had SEK 775 million of positive currency effects affecting the Sandvik Group. Also we have good progression on our savings efforts, and we had savings in the range of SEK 162 million in this quarter within the Sandvik Group, and all our savings programs, and of course the largest one is our supply chain optimization program, are running according to plan and delivering the results that we expected to get out of them. The market as such has been quite soft, that more or less goes across the board. Europe has seen maybe a bit better performance than what we've seen in other parts of the world, with quite stable demand and some signs of improvement in the western regions of Europe here.
I would say in the industrial segments where mining and construction have been areas which have been a bit tougher, in Europe while SMS and SMT have been areas that have seen somewhat better performance. North America comes in on a lower level, we see a stable development through the quarter, we don't see any declining trends in North America. The lower activity level has stabilized at the level that we're seeing right now. Stable at the lower level. Asia, mainly affected by the developments in the Chinese market, where we have seen some significant weakness during the quarter. Then sort of a bit of a mixed picture in the other regions of Asia, where actually India saw some slight growth, Japan has also had a fairly solid performance.
Looking at the sectors, automotive and aerospace stick out in the positive direction, while oil and gas is a weak market driven by the weakening we've seen in oil prices. Given this weak macroeconomic environment that we see in the world around us, with a bit slower GDP growth in most of the world, it's of course, very important that we have a strong product program, so we have a strong offering to reach out to our customers and that we can drive and support our organic development in the markets. Therefore, of course, it's really exciting and positive that we have a record year when it comes to product launches in the Sandvik Group this year.
All our efforts within research and development preceding years have started to bear fruit in 2014, and are now really gaining momentum into 2015. Looking at the various markets, I mentioned most of this already then, North America, somewhat negative trend compared to the preceding year, as well, for Asia, we see this negative trend. Europe, stable, some positive signs in the western part, and even though they're smaller regions for Sandvik, it's quite encouraging to see that both Africa and Australia do see quite positive growth, especially when it comes to order intake for the business. There we have been successful in booking new orders and mainly relating to our mining business here. Looking at this pie chart with our various segments. The biggest change in here from preceding quarters, and we've had quite a few quarters with the orange color for mining.
We can see that mining has flattened out and is very close to a zero level when it comes to organic growth. We seem to clearly have seen, even year-on-year, some stabilization now in the mining market. The mining market continues to develop flat in line with the levels that we're seeing right now. Construction is negative, as well also the energy sector, obviously driven by what we do see with the weakness in the oil and gas market. Looking at the demand trends, we continue to see, I would say strong positive development in the aerospace area and the main area where we see a continued negative trend into the second quarter here is in the energy sector, again, driven by the weak oil and gas prices. Looking at the numbers totally for the group, order intake came in at 22.7 billion SEK.
A negative change by 4% on total for the group. What is positive and encouraging is that we have a neutral book-to-bill for the mining business. Actually, despite the large order we took within Mining Systems, Mining Systems is below average when it comes to book-to-bill, so it's weighing down. The development when it comes to aftermarket and equipment was at or above this neutral book-to-bill. Reasonably stable and good market development for the equipment and aftermarket sides of the mining business. We continue to see challenging developments in the oil and gas industry, and that is one of the main driving factors, obviously, for the decrease in order intake that we're seeing for the company. Sequentially, this was a decline of 2% compared to the preceding quarter.
Invoicing came in at SEK 23.4 billion, which was a net change in price volume terms of 5% negative then. We really see negative organic growth across all BAs, driven by the weaker market conditions that we're seeing. Mining, these comparable numbers are getting quite small, and Mining is only -2% in price volume terms compared to the preceding year. Clearly a stabilization in the Mining market from the long period of time of decline that we've seen. EBIT, SEK 2.9 billion. We see quite a strong year-over-year earnings growth. Obviously, currency is the largest effect that we have on our EBIT in the quarter, but also then the good positive effects when it comes from our savings programs. Mats will touch a bit more on the details per business area, how this is coming through in the company.
Cash flow, strong cash flow based on good net working capital management, but also good discipline when it comes to our capital expenditures in the company. We actually revised our guidance down somewhat for the full year when it comes to capital expenditures in the group, from being below SEK 5 billion to be about SEK 4.5 billion in the updated guidance now in conjunction with this quarterly report. Comparing to our financial targets, well, we have reasonably strong growth on our top line, but this is obviously a currency effect that we're seeing now that's driving this organic growth or this total absolute growth that we're seeing in the company. We continue to focus on developing our market positions and to support organic growth, obviously developing our offering to our customers to really make sure that we have these best solutions out there in the market is absolutely key.
As I said earlier, we have a record high number of product launches, which will really support what we can offer our customers and enhance our abilities to develop positively in the market. Return on Capital Employed at 12%. While we need to continue to focus on reducing our net working capital and then restoring earnings in several parts of the company if we're going to get up to our target, long-term target to 25% Return on Capital. We have programs in all of these areas, which we are driving with full force through the company. Net Debt to Equity increased somewhat. The main reason for that was obviously the dividend payment that we did in this quarter. Cash flow, as I said earlier, was very strong, so that's counteracting that somewhat in the company.
The dividend was paid out, and we continue to have a very high dividend payout ratio in the company. I said earlier, Sandvik has had an uninterrupted dividend since 1870. Based on the strong cash flows we have and the good developments in terms of our results, we feel that we can continue to support a strong dividend payment to our shareholders. This slide we normally show every quarter here summarizing the main activities that we see in each business area around the company. To highlight some of the areas where we've made progress in this specific quarter, well, firstly within Machining Solutions about increasing the pace of product launches. The 1st wave of the large product launches was in April this year. The 2nd one will be this autumn.
We're making good progress with enhancing our product program, driving up our new sales ratio in the company to levels where they should be. We continue to restructure our manufacturing footprint to create a leaner, more efficient company here. Sandvik Mining is also consolidating its manufacturing footprint and continuing that process. We concluded the negotiations with our unions at our Turku site in Finland and are now progressing with the execution of that closure and the transfers to other sites. We also initiated the closure of a new site within Sandvik Mining in the quarter. We have a continued strong focus on growing and developing our aftermarket business, which is obviously the greatest opportunity that we have in this kind of market environment that we're seeing right now. Sandvik Materials Technology, the main highlight there is that we had good discipline regarding the buildup of inventories.
We avoided those in the second quarter, ahead of the summer shutdown. We will continue to focus on our net working capital efficiency in that business area. Construction, I would really like to lift up as a highlight. They've done an excellent job in improving their margins, have a really good leverage in the quarter. The cost savings are delivering the effects that we expect. We see strong development. Construction is actually somewhat ahead when it comes to the savings targets that they gave Mats at our capital markets day so far this year. Good progression despite facing a very tough market in the world around them. With that, I'll hand over to Mats to make some comments more about the financial numbers. Then I'll come back and wrap up the presentation.
Thank you, Olof. I will give second quarter highlights in some of our key areas. Starting with the development of net working capital. In absolute value, we reduced our net working capital with some SEK 400 million in the quarter. That was fully due to currency effects. Looking on the volumes, we actually managed to keep it flat from the first quarter, which is despite the seasonality we normally have when we are building net working capital in front of the holiday season now in the third quarter. Looking specifically on inventories, we managed to keep it flat in the quarter. We didn't have any significant under-over absorption for any of the business areas looking on the second quarter. However, it is important to remember that we had the stock built up last year in two out of five business areas, and that is Sandvik Materials Technology and Sandvik Machining Solutions.
I think it's important to recognize that when you're making a bridge analysis year-over-year. Looking on the relative development of net working capital, we have managed to sustain the level we reached in the fourth quarter of 28% in relative net working capital, which I think is a good development considering the enormous seasonality that we see in the first quarter, second quarter, and third quarter with the net working capital buildups. Looking into the third quarter, you can expect destocking in all business areas. We are actually aiming for sustaining the relative net working capital on 28% also into the third quarter, which I think will give a good base for reaching our long-term target of 25% going forward. All in all, I would say a good development in terms of net working capital. Moving over to our saving programs.
We have communicated savings of totally SEK 1.9 billion with full run rate end 2016, whereof we have for supply chain optimization SEK 1.4 billion. The first phase, SEK 800 million with full run rate this year. The second phase with SEK 600 million with full run rate end 2016. We achieved some SEK 500 million in full run rate end of second quarter. All of that is related to the first phase of the supply chain optimization program. I would say that we're well on track when it comes to reaching the SEK 800 million by end of this year. We have also announced the adjustment of our cost base, totally about SEK 500 million with annual run rate end 2016. We actually achieved SEK 160 million with annualized run rate in the second quarter.
In total, from all the savings program, we are now on the level of SEK 660 million when it comes to annualized run rate. All the ongoing cost savings program is actually running according to plan. Finally, a couple of words about the guidance, maybe starting with some comments on the currency effect for the second quarter. We had a positive currency effect, some SEK 775 million in the second quarter, which is somewhat lower than the original estimate we had of SEK 900 million for the second quarter. That difference is fully due to a strengthening of the SEK against U.S. dollar and the Chinese yuan during the quarter, which made the currency impact somewhat lower than estimated.
Looking into the third quarter in terms of guidance, we are estimating the currency effect to plus SEK 500 million in the second quarter, That is based on the closing rates of currencies end of June. In terms of the metal price effect, we are estimating that one to minus SEK 100 million in the third quarter, That is also based on closing rates end June, both for metals as well as currencies. Looking on the full year guidances, we are, as Olof said, we are changing our guidance when it comes to our capital expenditures for the full year to about SEK 4.5 billion compared to below SEK 5 billion in the previous estimate. When it comes to net financial item as well as the tax rate, we are keeping the previous guidance in that area. With that, I leave for Olof to summarize.
Thank you, Mats. Looking forward into the future beyond the specific quarter here. We continue to have a year here with a record number of product launches, That's of course a key thing to support, especially Sandvik Machining Solutions' growth and development going forward, that we get this upgrade in the product range here. Also, I would say the good developments that we've had in Sandvik Mining regarding sales in many areas are a lot supported by new products that we have introduced during last year into the market that are now gaining momentum and generating sales to customers around us, around the world. The aftermarket continues to be a key focus area in this environment where the capital expenditure rates are very low in the mining sector.
We're looking at continuously very innovative ways to try to go to the market there, support our customers, and create attractive solutions and options for them in the aftermarket. We are both, as I've showed previously, repair kits, where you get the full kit needed for a certain rebuild in a structured way as one order item from us. We're also looking at kits where we can do certain performance enhancements on, for example, rock drills, when you do the maintenance or the more major rebuilds on these kind of pieces of equipment. That makes it an even more attractive proposition for our customers if we can offer those kind of improvements. We're also looking at price per hour maintenance options.
Obviously, our customers are under a lot of pressure to find cost savings and improvements, and we need to find ways to support them in a good way and help them to achieve those savings, but at the same time, protect and develop Sandvik's business and our margins. We are building a leaner company, and this is, of course, especially important in this more weak market environment with quite slow global GDP growth rates that we see around us. That we have a strong focus on our cost efficiency programs and make sure that we continuously improve the productivity in the company going forward. To summarize the second quarter then. We had a very strong cash flow for a second quarter, I think that's something we can be proud of in the company. We had earnings growth.
A lot of that was currency, we can be happy with the progress on our cost savings measures. The market is soft, and obviously, we have negative growth in terms of price volume terms. We are doing what we can, and we have a lot of new products coming out into the market to continue to support our position in the market and our organic growth rates going forward by a very strong and updated offering to our customers. With that, Ancy, I suggest that we open up for questions.
Yes, we do. We have a possibility to ask questions here in the conference room, but also from the telephone lines. Shall we see if there are any questions from the telephone lines to start with, please, operator?
We have a question from Guillermo Laria at UBS. Please go ahead.
Hi. Good morning, everyone. Good morning, Olof, Mats, Ancy. Just wanted to ask a couple of questions regarding first SMT regarding the second half of 2015. Obviously, you face tough comps in terms of revenue growth, and obviously margins as well, especially in the 3Q last year. I was wondering if you could guide us as to how to forecast under absorption, if any, or underlying drop through or flow to margins, just to get an idea of how you're going to perform in SMT towards the second half of 2015. Thank you.
In the third quarter, we normally have a drop in EBIT margin of in the range to 3%-4%. We will have a normal seasonality in SMT, somewhat negatively enhanced by the weaker developments we see in the oil and gas sector. You should assume something towards the upper end of that range looking at the third quarter of this year.
A second question regarding construction. When you look at North America and Australia, it was a great performance, and there's no large orders. I wanted to get some color on how your business is doing there and why is it growing so much. Thank you.
Well, North America, I would say, generally a good development for us in the market. Actually mobile crushers, which has been a problem area for us, had a fairly good sales development in the quarter in North America. Looking at Australia, we did actually have one larger contract, doesn't qualify as a major order from a Sandvik perspective, but in terms of crushes to a specific customer in Australia. We have also a general good activity level. Looking into Q3, I would say Australia is maybe the region where we see the most attractive opportunities right now where we're negotiating several large possible contracts coming now into the third quarter.
Thank you. I'll stay back in line. Thank you.
We have one question here in the room, please. Anders?
Yes, Anders Roslund, Swedbank. Regarding Machining Solutions, how do the short-term outlook look in Europe, U.S., and Asia?
Well, as we said, in Europe, we have seen fairly stable development in the second quarter, some signs of strength in the western part of Europe. That's mainly driven by, I would say, the aerospace and automotive segments that have been strong there. North America did weaken compared to last year, we've not seen any negative trends, so quite a stable level there. I would say also a fairly stable level where we're at in Asia as well. Looking at the insert sales for that's what that's worth these first couple of weeks in the summer period here, we see a stable level at the rate that we've seen during the activity levels we're seeing in Q2 going into Q3 here.
Okay. Thank you.
Okay. Operator, we'll continue with a question from the telephone conference, please.
As a reminder, it's zero one on your telephone keypad if you have a question. We have a question from Mr. Sebastian Künne at Exane. Please go ahead.
Yes, good morning. One question on Machining Solutions and net working capital has gone up. I was just wondering if you are entering Q3 with a bit too much inventory for that division, and what does it mean for the margin in Q3, margin outlook in Q3? I will have a follow-up question.
No, I don't think we are overstocked when it comes to Machining Solutions going into the third quarter. In terms of under absorption in the third quarter, I think you can assume the same pattern as we saw last year in terms of the margin impact between the second and third quarter. As good control as previous year, I would say.
Okay. A follow-up on Machining Solutions. The currency impact was much lower than expected in Q2, than I expected. Was there any particular reason? Was there a reclassification between the corporate line and Machining Solutions?
No, not at all. We had some difference in inflows in the second quarter. Secondly, when we're looking on the development of the U.S. dollar, in particular throughout the quarter, it's the highest impact, I would say, on Machining Solutions. A little bit of a difference in flow, but no kind of reclassifications, no.
Okay, thank you.
Do we have the next question from the telephone conference, please, operator?
The next question comes from Mr. Andreas Willi at JPMorgan. Please go ahead.
Good morning. My question is on Machining Solutions and the growth profile there. Global industrial production was up about 2.5% year-on-year in the first half of this year, and your business was down 2.5% despite the product introductions. Could you maybe break down the performance as you see it relative to market share and market growth? What is due to some de-stocking in the channel that may drive down your sales, which historically have been more correlated with IP than we have seen in the recent periods? Thank you.
When we look at what's available in terms of market share data, we do not believe that we've had any market share losses in the business. I would say also that the new product and introductions, unfortunately, in terms of sales during Q2, have had very limited impact because the first wave of those introductions really came in April. It does take some time until they build momentum. Obviously our customers are planning their inventories up and down, and if they lower their production rates to adapt inventories, then that has obviously a very direct effect on Sandvik Machining Solutions.
Thank you.
Yeah. We also see the same pattern across all our three brands in market. You cannot say that we're losing share on one of the brands or so. We have a very broad market exposure in the business. This is in line with the activity levels that you've seen in the sectors that we are touching with Machining Solutions. The production, obviously, production rates in these sectors.
Thank you.
Okay, thank you. We go to the next question, please, operator.
The next question comes from Mr. Peder Trolle at Handelsbanken Capital Markets. Please go ahead.
Yes, good morning, Olof, Mats, and Ancy. I have a lot of questions, I'll get back in line after my usual two ones. My first one regards the drop-through in the SMS business. It's quite big drop-through, you mentioned that you have not been punished that much on the margin on the net working capital on that specific division. How should we see that going forward, the drop-through? Is that negatively effective, all else equals by the start of the product launches? Could you please elaborate a bit about the drop-through here?
Obviously, -72% leverage is not what we would normally expect to see. It's very much on the high end there. In part, we have been planning and driving for a stronger development in the economy around us than what we've actually seen in the quarter. There is a need to look at tighter cost control in the business area based on the organic growth rates that we are seeing right now. To a certain extent, the product launches have had some impact, but not major. We're obviously not happy with the -72% in Machining Solutions for the quarter.
That's very clear. Could I also ask you general questions on price and mix for the group? I know that you've taken this out from the communication, for the group, and maybe a bit on the business there, especially, I would say, mix in SMS and the pure price contribution in Mining would be nice to hear about.
For the group, we had about 1% positive net price change, four out of five business areas had a positive price development. The exception is Sandvik Venture, where we actually saw some deterioration of prices based on what's happening mainly in the oil and gas sector here. Mining and SMS were in positive territory. Obviously, the mining market is very tough, it's only very small positive price developments that we can achieve there, it's still in positive territory. I'll say construction, maybe you could say neutral development to slightly positive.
That's great. Just a quick one. Sorry, Mats, the savings of SEK 162. Should I add to that the sort of other savings that we debated last year in the U.S. about HR, IT outsourcing, all of that? Is this pure saving from the scope programs?
It's pure from the scope programs, yes.
Thank you. I get back in line.
Thank you. Operator, you can put through the next question, please.
The next question comes from Mr. Alexander Virgo at Nomura. Please go ahead.
Hi. Good morning, gentlemen. Thank you for taking my call. I had two questions, please. One, I just wondered whether you could talk about the impact of the oil and gas slowdown on SMS. I know you talk about it or refer to it in the text in the report. I just wondered whether you could perhaps try and give us an indication of how much of an impact it's having on the general engineering segment. The second question related to oil and gas-
That one with oil and gas. Obviously, one of the main drivers for weakness in North America is oil and gas sector. As you say, our direct exposure is quite small to oil and gas from a SMS perspective. A lot of our customers that we classify as general engineering are supplying products that then end up or are driven by the oil and gas sector. Exactly what percentage that is of course, very difficult for us to calculate exactly. It would be an enormous work to do that, but clearly that has been one driver for the weakness that SMS has seen in the second quarter in North America.
Okay. Thank you. Just on, I guess, the second question on oil and gas, I wondered if you can perhaps quantify actually how much of a drop you've seen in Varel, and whether you can give us indication of the target savings you have for the restructuring actions you've initiated there.
Well, we don't specifically talk about results, sub-segments that we report in our report. The drop has been quite significant for Varel due to especially the lower activity in North America that we have seen. We are taking a lot of measures to address the situation in the market, downsizing our personnel, furlough programs, other cost saving initiatives. You can see that in part in the operating leverage for Venture, which actually is fairly good for the quarter here. A lot of activities going on there, but we've chosen not to quantify on more specific units in our business area level in the company.
Okay. Thank you.
Thank you. Do we have any questions here from the Stockholm? No. In that case, we continue with the conference call. Please, could you put the next question through, please, operator?
The next question comes from Mr. Graham Phillips at Jefferies. Please go ahead.
Yes, good morning. Thanks for taking my call. The question really was about Machining Solutions and just this market share issue. In fact, we can only look at another company, Kennametal. It looks like you're doing slightly better than originally. Now one wonders, what is the general market share position that we can look at for that division, and what are you specifically doing around solid carbide products in that area?
Well, to start with market share, we don't lose market share over a couple of quarters across three brands in the company. When I look at Seco, Coromant, Walter, et cetera, specific performance, you can see the same trends across all the different brands. I feel confident in saying that we are not losing any market share in that business. When it comes to solid carbide products, they are part now of what used to be hard materials now called Sandvik Hyperion, which is a part of Venture then. They're reported in that part of the business within the Sandvik Group.
Is that likely to remain? Is that not a substitute product for the traditional SMS areas?
Okay. All our inserts more or less that we produce and sell in Sandvik are within SMS are solid carbide.
Okay.
You have also high speed steel to certain applications, but that's a minor part of the business. Solid carbide is the base, the material that we use across the very vast majority of SMS business. We also make larger and other items in solid carbide, and that's how I interpreted your question there. Pieces for drill bits, die cutters, dyes for wire drawing in the steel industry, et cetera. That business is part of Sandvik Hyperion and Venture. That's not really the metal cutting part here that I was referring to.
Okay. Thanks for clearing that up. Also just with the new Chairman Molin arrived, what meetings have you had with him, and how do you think he'll differ with his view of the company, compared to the previous chair?
It's early days for Johan. He's just started, but he's really engaging with full energy into the company. We're running an introduction program for us through Sandvik for him. He's meeting our business areas, looking at our strategy. We've only had one board meeting so far. I think Johan brings with him a fantastic industrial experience. A lot of good thoughts on how we can continue to improve Sandvik going forward.
Okay. Thank you.
Thank you. I believe one further question from the telephone conference please, operator.
We have a question from Mr. Peder Trolle at Handelsbanken Capital Markets. Please go ahead.
Yes, thank you for taking my question. You mentioned all of the importance of driving the aftermarket in mining, you gave us some concrete examples how. Could you please share with us some empirical evidence? You normally help us with sales mix, for that specific division. Either to give us the
The mix was 59% aftermarket in the quarter, 21% equipment, and 20% Mining Systems in Q2 for the group. Or for the mining business area.
Yeah, that's fair. On my previous price question, positive for mining. If you look at the aftermarket in per se, is that positive also? Is it more or less than for the division as a whole?
It is positive, but we are seeing, there's an enormous price pressure from the mining companies on the aftermarket business. I would say it's very strong in the rock tools business, which has a tougher pricing environment than the parts and service part of the business. That is what we're experiencing right now.
That's very clear. Could I also ask on the That's more to Mats, though. On the FX, there seems to be quite big positive on the group, to get to the SEK 775 total. How are you thinking about that for when you guide for the third quarter? Another nitty-gritty one, we talk about a one-off structure effect on SMT in the bridge of SEK 270 on the EBIT, of which, so I guess SEK 8 is the nickel. What's the rest? Is that profits coming out of the divestments or what's the rest there? Thank you.
Starting with the currencies. When you are talking about that kind of effect, it's a bridge effect between the years. We had a rather negative impact last year in the second quarter when it comes to group common related to the strategic hedge. That is much less looking on the second quarter this year. That is more of a kind of a bridge effect. I'm not anticipating any kind of big effects on group going into the second quarter when it comes to currencies.
That's clear.
The second one, can you repeat that one, please?
No, that's on the bridge for SMT, the structure and one-off sort of factor is minus SEK 260 on top line and minus SEK 270 on the EBIT. Could you please give us the component on the EBIT there? I guess nickel is one of them, but what's the rest?
We're talking about the divestments also, I guess. Of the distribution business and so forth in the fourth quarter. I think looking on the bridge, and specifically looking on Materials Technology, it's also important to remember over-absorption in the second quarter 2014, because I think we had an effect of approx SEK 70 million, meaning 2% units on the EBIT margin in the second quarter last year. That also has an effect when you're looking year-on-year in terms of a bridge effect.
You can't call that structure one-off.
No.
It needs to be in the organic, right?
No, it's inorganic. I think it's important to remember that. When it comes to structure, it's the divestment.
To clarify, the EBIT year-on-year bridge of minus SEK 278 is nickel, rest is divestment, more or less?
Yes.
Okay. Thank you.
Thank you. Do we have any final questions? Yes, we do, here in the front. Thank you.
Yes. Anders Roslund again. A little bit about the structural measures in construction seems to be going very well. You stick to your old target of reaching 6%-8% at the end of the year? In mining, will we look for 2016 before seeing margins coming up, or is it a trend we will see also in this year?
Mining has come up a lot since last year. Mining is biting. Sequentially, mining sequentially had slight negative currency effects. Some things moving between quarters, mining is stepping up, if you look at the bridge on the operating leverage, they're actually up SEK 80 million on profit, despite underlying down SEK 150 million on the top line. Mining is transforming itself. I feel very happy with the progression that we're seeing in mining. As said, in the aftermarket, a lot of good things are happening, we're driving that with full force. On the equipment side, we are upgrading our product portfolio. We're driving sales hard here. There I think we also have a good development, both of growing the market and taking out costs and creating efficiencies.
Construction, they're actually at 7% if you go with one digit. We said 7%-8% in the capital markets day last year. Construction doing well. They are exceeding their cost reduction targets. We really need top line to really get that business performing well, we're going to continue to drive hard, I think DJ and his team are doing a really good job in what was a very challenging starting point for the construction, they've not had any help in the market in terms of market recovery to achieve the performance improvements that they've got. I think they've done an excellent job there.
Okay. Thanks.
Thank you. That said, there are no further questions, so we conclude this session, and we wish you a good summer and a happy holiday when you get one. Thank you.
Thanks very much.