Juha Rouhiainen: Hi, everyone. It's Juha Rouhiainen from Metso Investor Relations, and I want to welcome you all to this conference call where we discuss our Q3 2026 results, which were published a few hours ago. Results will be presented by President and CEO, Sami Takaluoma, and CFO, Pasi Kyckling, and after the presentation, we will have a Q&A.
Juha Rouhiainen: We have scheduled 60 minutes for this call, and as a final reminder, we will be making some forward-looking statements, and that is why we have the disclaimer in our presentation deck. With these remarks, I will be handing over to Sami. Please go ahead.
Sami Takaluoma: Thank you, Juha, and good afternoon to everybody online. Very happy to present our key figures from the Q3. A very strong position in the market and the activity from the customers resulted our orders received to go above EUR 1.6 billion, growth in 24% in the constant currencies. Sales was developing according to the plan and EUR 1.4 billion close and the growth of 1% in the constant currencies.
Sami Takaluoma: Then the drop through to margins EUR 230 million in the period, resulting 16.8% margin. Operating cash flow was EUR 136 million, and in the rolling 12 month, we are now in the EUR 786 million. Cash conversion was 85% for the 12-month period. So this strong order growth and solid profitability was, as mentioned, 28, 24 in the constant currencies. Book-to-bill relation was 1.18 in the period compared to 0.95 a year ago.
Sami Takaluoma: Minerals equipment orders were strong, 79% growth, and we continue to deliver strong orders in the aftermarket. Now the 11% growth for this quarter. Backlog has increased 20% and is currently now EUR 3.9 billion. This supports very nicely the future sales and margin generation. Sales, as mentioned, 3% up. Aftermarket sales, 10% growth in the sales and now in this period it represented 57% of the group sales number.
Sami Takaluoma: Adjusted EBITA grew by 4%, to EUR 230 million, and the margin was 16.8%, a notch up from the year before numbers. In the period, we did a good amount of activity for the future success as well. Regarding the service capacity, we made a decision for the new service center in the mining region of Belo Horizonte in Brazil. Build-up is next year, and then starting from the beginning of 2028 to serve the customers.
Sami Takaluoma: Regarding the technology and developing our offering, a few very important product launches. The Sampo Cell flotation, coarse particle flotation. It is groundbreaking innovation. We continue to develop our mobile equipment fleet in the aggregate side with the two new products, LT400RS and LT200HPX, which has been taken very positively in the marketplace. Three AI-enabled mining digital solutions to improve the production, performance, and safety at the customer sites were launched during the period.
Sami Takaluoma: The low-emission DRI smelting technology, which is our flagship, you can say, first commercial scale order was received now in Q3. Regarding the M&A, so acquisitions side, we closed an acquisition for the hose and progressive cavity pumps. That was closing the technological gap in our pump offering. After the period, but announced now recently, was the bronze alloy component manufacturer, Italbronze.
Sami Takaluoma: That is, again, a very strategic acquisition in terms of securing a very important component for our crushing technology, both in aggregate and in minerals markets. Regarding the outlook, we expect the market activity in both minerals and aggregates to remain at the current level for the next six-month period. I hand on now to Pasi to go through our financials.
Pasi Kyckling: Thank you, Sami, and good day, everyone, also from my side. Let me start with orders and sales bridges. Our orders increased by EUR 350 million or 28% year on year, resulting to EUR 1,614 million. The largest contribution came from minerals equipment, adding EUR 258 million. Minerals aftermarket contributed other EUR 44 million, while aggregate also provided a positive contribution from equipment.
Pasi Kyckling: Currencies had a positive impact of EUR 42 million. Overall, aftermarket orders increased by 9%. Looking at sales, our group sales increased by EUR 45 million to EUR 1,373 million. Largest positive contribution came from minerals aftermarket, while minerals equipment sales were below the comparison period. Sequentially, however, minerals equipment increased sales by EUR 57 million or 17%. In that comparison, the comparison point is Q2 this year. So we are also seeing a good progress in mineral equipment deliveries and revenue.
Pasi Kyckling: Aftermarket sales overall increased by 10%. Overall, Q3 revenue was spot on with our plans and expectations when we entered the quarter in early July this year. I will come back to the timing of equipment deliveries when we look at minerals segment more in detail. Let us then turn to our profitability. Adjusted EBITA increased by EUR 8 million to EUR 230 million, and the margin improved slightly to 16.8%.
Pasi Kyckling: Higher volumes contributed positively with EUR 15 million year on year. Gross margin had a EUR -15 million impact, while SG&A had EUR -5 million impact. Both gross margin and SG&A were affected by the adjustment items, and excluding the adjustments, these developed year on year in a more stable way. Earnings per share from continuing operations were EUR 0.15. Overall profitability remains solid at group level and in both of our reporting segments.
Pasi Kyckling: Let's look at cash flow. Cash flow from operations was EUR 136 million in this quarter. The main year-on-year difference was working capital, which had a -EUR 140 million impact. The negative impact in working capital reflects higher customer activity and the growing order backlog that we have. On a rolling 12-month basis, operating cash flow was EUR 786 million, and the cash conversion 85%.
Pasi Kyckling: While working capital increased as the business is growing, cash generation remains healthy over the longer term. Sequentially, the increase in working capital is split between inventory and payables. Then if we move on and look at our balance sheet. Overall, the balance sheet remains strong. Our net debt at the end of the period was EUR 1,175 million, and net debt to EBITA was 1.3 times comfortably below our 1.5 times target.
Pasi Kyckling: At the end of the quarter, we had EUR 445 million of cash, and then significant undrawn committed credit facilities. Average interest rate for the period was 3.6%. The balance sheet continues to give us good capacity to execute our strategy and to invest in profitable growth, including both organic and inorganic investments. Let's look at our segments and start from Aggregates. Orders increased by 4% to EUR 292 million. That represents 2% organic growth in constant currencies.
Pasi Kyckling: Orders increased both in North America and Europe, with a stronger growth in Europe coming from the Nordic countries. Orders in rest of the world declined somewhat. Sales increased by 5% to EUR 324 million. Very importantly, profitability continued to improve, and our adjusted EBITA increased to EUR 53 million and the margin improved 80 basis points to 16.4%. This was supported by higher sales combined with solid operational execution.
Pasi Kyckling: This was another quarter of steady progress in Aggregates, with order growth both in Europe and North America, and further profitability improvement. Let's look at Minerals. Customer activity overall remained healthy across both equipment and aftermarket. Orders increased by 34% to EUR 1,323 million, or 31% organic growth in constant currencies. Equipment orders increased by 79%.
Pasi Kyckling: The quarter also included a EUR 90 million copper-related order. But importantly, the growth was very broad-based across our product offering, with the strongest growth in grinding and crushing. The order growth was also broad-based when it comes to geographical point of view. Small and medium-sized orders also remained at strong level. Aftermarket orders increased by 11%. This overall resulted to book-to-bill in Minerals to 1.26, and the order backlog increased by 21% or approximately EUR 580 million to EUR 3,372 million.
Pasi Kyckling: This backlog gives us a solid starting point for the coming quarters. Looking at the sales. Mineral sales increased by 3% to EUR 1,049 million, and it was stable organically. Aftermarket sales increased 11% and it represents 64% of our Mineral sales in Q3. Equipment sales increased by EUR 57 million or 17% sequentially from Q2 this year. We are seeing good progress in deliveries in sequential comparison.
Pasi Kyckling: The year-on-year comparison in Minerals equipment is mainly about timing. A year ago, some larger orders progressed faster through customers' investment schedules, while some customer investments are currently progressing more gradually. Further, our order intake Q2 and Q3 last year for equipment was slower. These factors affect the timing of deliveries and the sales recognition now in Q3 this year.
Pasi Kyckling: Looking over a longer period of time, equipment orders have historically translated into sales over several quarters, and around a year can be used as a broad reference point. However, there is no mechanical conversion period as the precise timing of each project depends on progress by customer investments. Just to remind everyone that for projects, we apply the percentage of completion accounting.
Pasi Kyckling: With strong equipment order intake and higher backlog, we have a solid foundation for future deliveries and growth. Looking at our Q3 profitability, the adjusted EBITA increased to EUR 189 million and the margin was 18%. The aftermarket sales supported profitability. At the same time, aftermarket margins were temporarily affected by a surge in our freight costs following the crisis in Middle East. We have implemented aftermarket price increases to address this temporary pressure.
Pasi Kyckling: Overall, Minerals delivered very strong and broad-based order growth, good sequential progress in equipment deliveries, and a significantly higher backlog and solid profitability. With that, would like to hand back to you, Sami, to summarize.
Sami Takaluoma: Thank you, Pasi. Summarizing the presentation and our Q3. Customer activity was staying in a very good level, and we were able to convert that into strong orders. Result of that is a growing backlog, and that will support our future sales for the upcoming periods and 2027. Sales was progressing as we expected, and solid profitability across both of our segments. We did the investments for our long-term profitable growth to continue this journey. Juha, back to you.
Juha Rouhiainen: Thank you, gentlemen, for the presentation. Operator, we can now open the lines for questions.
Operator: If you wish to ask a question, please dial #5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial #6 on your telephone keypad. The next question comes from Chitrita Sinha from J.P. Morgan. Please go ahead.
Chitrita Sinha: Yeah. Hi, Sami and Pasi. A few questions on my side on minerals, please. First question, just on the order number. Clearly a very significant increase year-on-year, and sequentially stronger on small medium-sized orders from a very high Q2 level. How should we think about this kind of base run rate now? Also maybe you can touch on the large order pipeline that you're seeing.
Sami Takaluoma: Yes. Thank you for that question. The base orders, as we talk about now, they were high on the Q2 order books. The Q3 was continuing that one. For us, that means that we of course know the activity level from the customer side to fill in our pipeline, and the conversion was very successful in the Q3.
Sami Takaluoma: Activity is not showing anything drastic changes as we have also guided in our guidance that the market activity is to be remaining. Obviously, it is always on the customer side to make the final decision. We expect that we will see the base orders to continue to be on a good, even maybe on strong level going forward. The second part of your question was about the larger orders.
Sami Takaluoma: As we explained today, in the Q3 numbers, we do have one of these larger ones, EUR 90 million copper order. The timing of the larger ones is even more difficult, maybe sometimes to predict. From the pipeline perspective, they are there, and they are moving on the customer side forward.
Sami Takaluoma: That makes us to be quite confident that they start to also come in a certain pace. Is it going to be one per quarter or two per quarter? That remains to be seen, but for the next six-month period and also beyond that one. There is definitely good pipeline of these orders also to start to materialize and convert to the orders.
Chitrita Sinha: Thank you. My next question was just regarding deliveries in Minerals. As you mentioned, there is a bit of timing impact, maybe a reflection of some of the order development this time last year. It feels like the backlog since then has been growing pretty nicely. Could you maybe give a bit of color in terms of the step up we should expect in Q4 deliveries?
Sami Takaluoma: Yeah. That is a good question. Thank you for that. We obviously do not provide guidance on revenue or orders specifically, not for Q4 either. Like we said, we are in extremely good position to continue to deliver growth going forward in terms of revenue and the backlog where we have improvement both in the aftermarket side, then also especially in the capital side, provides a good starting point for that.
Sami Takaluoma: You may remember that Q4 last year, we had relatively high share of equipment in our mix. Let us see how it plays out this year. There is order book and backlog both from capital and aftermarket side to deliver a good solid quarter. I think I leave it there.
Chitrita Sinha: Thank you. If I can ask just a final question on pumps and your strategy there. You made an acquisition in the space this quarter. At the Capital Markets Day, you said that you wanted to get to the number 1, number 2 position in this vertical. How many more acquisitions could we expect in this vertical, would these need to be larger in scale? Thank you.
Sami Takaluoma: Yes. We have a very solid strategy for our pumps business and acquisitions do play a role. Organic growth plays a role equally importantly there as well. Acquisitions are something that we work on. We have now been able to close one, it was not the only one that we were working. I would maybe not say that they are
Sami Takaluoma: Super transformative, the ones that we are working, but very important, of course, from our strategy point of view that we are currently going through with the potential target. Very difficult to guide again anything of the timing and so on. We have a very active work ongoing also in this front. It is not only pumps, but pumps, of course, we have highlighted of one area that we want to be having inorganic investments done, partly to close these technological gaps and then grow the business as well.
Chitrita Sinha: Perfect. Thank you very much.
Operator: The next question comes from Christian Hinderaker from Goldman Sachs. Please go ahead.
Christian Hinderaker: Morning, Sami. Morning, Pasi. Thanks for the time. I wanted to start on the crushing and grinding demand strength. We have seen two strong quarters of that now, a number included in your press releases over Q3. I guess trying to understand what proportion of the orders in the last six months have included products from other phases of the flow sheet, which do not seem to get mentioned, cyclone screens, pumps.
Christian Hinderaker: Then just mechanically, when we think about these concentrator expansions customers, how does that flow through into Metso? Is that coming in designated blocks for different product packages? Or is it that the other product packages are being awarded to other suppliers at the same time as your crushing and grinding wins?
Sami Takaluoma: Yes, thanks for that question. What we said was that it was driven by crushing and grinding. It did not mean that it was only crushing and grinding as you did not expect either. There was a good broad-based orders received from all technologies inside the flow sheet from that perspective. But the strong one was where these two.
Sami Takaluoma: Typically, customers do behave a little bit differently, but one type of progressing with the investment is to start according to the flow sheet where the crushing and grinding is the first step. That is kind of explaining partly of this development as well. The next packages are coming then later. What is driving that, why crushing and grinding, those are typically the long lead items in the flow sheet, so the delivery times are longest then, and that could be one rationale for customers to start from there.
Christian Hinderaker: Thank you. I want to touch then on logistics inflation, maybe you can help us quantify that. How big are the increases in the costs you are getting quoted from your logistic partners? Then when we think about the basis point impact on your actual margins in the bridge for minerals, can you help quantify that?
Pasi Kyckling: Well, first of all, if we start from the increases we are seeing, there are a couple of different things driving this, starting from the Hormuz and Middle East crisis. Simply, fuel prices have increased quite a bit, and that impacts on logistics. Then the second aspect is that because of the crisis, there is overall tightness in the capacity available for certain routes.
Pasi Kyckling: Then when there is sort of a favorable supply-demand situation for the logistic providers, they understandably take advantage of that and hike prices. We have seen in certain routes, very significant, doubling in some cases even, and tripling container prices, and it is very drastic. Then at the same time, at Metso, we are in a lucky position that overall logistic is a minor part of our cost footprint, so that is good to remember.
Pasi Kyckling: Then what we have done is that already when the Hormuz started, we of course understood that logistic costs will increase. We have also some other but limited cost increases elsewhere, and we have proactively implemented price increases. Now, the impact we see in this quarter, and maybe not going to margins, but rather from EUR point of view, we sort of see mid-high single-digit millions of extra costs because of this, just to give you an idea that what we are talking about. Then of course, you can translate that to margin impact.
Christian Hinderaker: Yeah, really helpful. Thank you. Maybe if I can just a third one on your point on tightness in shipping. Has this resulted in the revenue disappointment? You said it was in line with your expectations, but obviously we have had three quarters now where revenues have been below market expectations. So trying to understand if that is the wrong calibration of book-to-bill conversion timings or if there are any sort of shipment issues that have happened in the quarter.
Pasi Kyckling: Yeah. Again, like I said during the presentation already, we delivered from sort of an internal forecasting point of view, Q3 revenues, exactly like we thought when we started the quarter. The logistic tightness obviously is not helping, but I think the teams have been very successful on sort of getting goods out.
Pasi Kyckling: The tightness is also, it is not a broad base that every route is impacted, but especially India has been impacted from the availability point of view. That is of course, an important manufacturing sourcing destination for us. But there is nothing material that would have any impact on our revenue in this quarter. However, prices, like we discussed, we see higher prices.
Christian Hinderaker: Very clear. Thank you.
Operator: The next question comes from Antti Kansanen from SEB. Please go ahead.
Antti Kansanen: Hi, guys. It is Antti from SEB. Couple of questions for me, I will start with coming back to the minerals equipment orders on Q3. Sami, you talked about that you have not seen any drastic changes on the market activity, that is what you have been guiding.
Antti Kansanen: Is this a step up that we have seen on the base order activity in the past few quarters? Is that decision-making? Is there something timing related that has driven the increases, can you pinpoint the reason why we have seen such a surge on the smaller orders in the last 6 months?
Sami Takaluoma: It is part of this positive cycle that has started some time ago in the minerals processing, and these base orders are typically the ones that start to come through first in that type of situation. We started to see the pipeline increasing last year, and now they have started to convert them to the orders, and that is the main driver of the base order increase in the few last quarters.
Pasi Kyckling: Antti, maybe I can reflect on this as well. What the base orders typically are, they are either a customer replacing something to continue to have operations that they can run in a reliable way going forward, or then it is opening a bottleneck in their operation. I think when we look at the commodity price development, et cetera, that is certainly encouraging also customers to move forward. Gold prices, also copper price is a really healthy level at this stage.
Pasi Kyckling: In long term, in copper, the supply/demand situation looks very positive, like we have discussed many times. But now also in short term, the prices have increased, and that may be one important consideration of customers to move forward and either open bottlenecks or then replace their existing equipment.
Sami Takaluoma: And maybe, Antti, if I continue one more reminder that when we talk about this base order, they are not all brownfield either. Maybe you remember, but there was a greenfield copper case in Sweden, for example. The customer placed the orders in two different batches in the beginning of the year and then later the second one. They kind of go in the category of this base order now in these discussions, but it was actually a pure greenfield copper case.
Antti Kansanen: Okay. Let us put it in this way. Have you been positively surprised on the levels of the past six months? I am just thinking what would need to happen for you guys to guide for improving demand. As you have been quite optimistic on the larger deals and now there has been this kind of a sequential improvement on the base orders as well.
Sami Takaluoma: Well, we are guiding how we see the market activity. If we look now 2 quarters back, including the one that we just reported today, activity level is good, and we are able to convert a lot of that to the orders. This is also our guidance, how we see the future, that our pipeline tells that it will continue to stay in a good level.
Antti Kansanen: Okay. I had a question to Pasi on the cash flow side. I did not fully understand the negative net working capital impact. You were referring to growth in the business. I would assume that when you are growing on such a good clip on the equipment orders and the book-to-bill on the equipment side is high, the advanced payment balance would support your working capital.
Antti Kansanen: When maybe at some point when the orders start to maybe fade and you deliver more, then that is a negative for working capital. Are you happy with the working capital levels that we have had this year, and how do you recognize that issue that I saw?
Pasi Kyckling: No, thanks, Antti, that is a good, fair question. If we cut it to couple of pieces, first of all, our approach on capital orders is exactly the same as earlier. We recognize the order when we have a PO and then when we have an advance payment, and this is true also in this quarter. On those orders, we have received the advanced payments that we have agreed with the customers.
Pasi Kyckling: Then, what I referred on the timing, et cetera, is the rest of the portfolio. We have gotten orders, both capital and aftermarket in the earlier periods, and pushing those through our funnel continues, and that requires working capital. That is then the timing element of it.
Pasi Kyckling: Again, part of that revenue was recognized this quarter. Then we have a lot of backlog and then related activities to deliver and recognize the revenue then in the future periods. There are those 2 elements and indeed, with strong order intake, especially in the capital side of business, we have gotten fair amount of advanced payments, and that is included in the numbers we have reported.
Antti Kansanen: Okay, fair enough. Thank you very much.
Operator: The next question comes from Tore Fangmann from Bank of America. Please go ahead.
Tore Fangmann: Hi. Hello, Sami and Pasi. Good afternoon. Two questions from my side. First would be on the aftermarket side of Minerals orders. We have now seen levels of somewhere around EUR 710 to EUR 740 million over the past three quarters. Overall, would just like to hear from you, how do you see this progressing into coming quarters, and what is the main driver? Is it rather coming from the spares and wears part or rather coming from the upgrades and modernizations? Thank you.
Sami Takaluoma: Yes. Minerals aftermarket is developing exactly as we want. It is driven mainly by the spares and wears. That said, we also knew that there is going to be upgrades and modernizations, and that conversion has also happened during this year. The pipeline, which was starting to grow quite high last year, then it started to convert also to the orders. We see that the drivers are, of course, customers want to operate trouble-free.
Sami Takaluoma: That is driving our activity on the customer side to ensure that the production continues and preventive maintenance is done on time, and the shutdowns are planned properly and all that. We see our large installed base that we have out there is very much in operation, and that gives the good potential also for the upcoming quarters and upcoming years.
Tore Fangmann: Okay. We have seen, just if I think about especially the spares and wears part, I suppose highly correlated to the utilization rates of your customers. We have seen already utilization rates very high in 2025. They have been seemingly even higher now in 2026. So how much more incremental growth into like a 2027, 2028 can we actually see here from utilization even increasing further? Or what would be the drivers of spares and wears growth?
Sami Takaluoma: Yeah, I think the utilization levels, of course, there is a story for each of the mining site, but they are relatively a good level, which is of course what our customers want to achieve. That said, there is continuous need for the spare part replacements. Of course, the consumables part is very clear that when you utilize with the high rates your equipment, you need to ensure that you have consumable parts that are doing their part in the process.
Sami Takaluoma: So in that sense, there is potential. It is not related so much of the utilization rates to increase. It is more about customers caring about the future production as well, which they are now doing. They want to be able to produce 2027 as trouble-free as possible, and that is one of the main drivers for our business.
Sami Takaluoma: Of course, one more area is that the capital equipment delivery start to happen. So the new installed base is also getting online, and that is always then, especially from the greenfields part, creating new additional installed base, which is the source for the aftermarket.
Pasi Kyckling: I would like to add two points.
Tore Fangmann: Yes, sorry. Go ahead.
Pasi Kyckling: two points on this. The first one is on upgrades and modernizations. We continue to see those orders coming in at good level. It's not main part of the aftermarket, but it's an important part. The pipeline there is also good going forward. When we talk about mining sites specifically, there has been couple of large mining sites not operating or not operating in an optimal way during the year. Certainly, we have important install base in some of those, and that provides also opportunities in 2026 to 2027 type comparison.
Tore Fangmann: Perfect. Understood. Thank you. My second question would be on revenue recognition or revenue outlook within the capital part of the Minerals business. Just wondering here, we obviously now have a very strong backlog that would provide for couple of years of very strong revenue growth.
Tore Fangmann: How do you think about the needed capital and basically capital spend to increase your own production facilities? Secondly, would you see a risk that lead times will just be elongating going forward, and we will not be sticking to the traditional 12 months roundabout? Thank you.
Sami Takaluoma: Yes. That's of course, something that we started to see the signs of this positive cycle, and we have done those pre-actions already 2 years ago and continue to do so. Where we are today is quite a good situation. We have a higher order intakes and grown backlog.
Sami Takaluoma: As we are today, we don't see any big troubles from that perspective. 12-month is that kind of like, it depends so much on the product. We have lead times from 6 months to 18 months. From that perspective, currently, things are looking normal. Of course, if this is accelerated during 2027, 2028, then even our
Sami Takaluoma: work that we have done to ensure that we are able to deliver for our customers is going to be tested once again. For that, we are also then preparing to do some actions. It's not so much of our own investment as such, it's more like our supply chain organizations to work very perfectly in their own operations.
Tore Fangmann: Great. Thank you both.
Operator: The next question comes from Nick Housden, from RBC Capital Markets. Please go ahead.
Nick Housden: Yes. Hi. Thank you for taking my questions. The first one is just a clarification about the logistics inflation, and your intention to raise prices to offset that. Will you be able to raise prices quickly enough that it will offset the headwind in Q4? Or do we still expect to see some near-term pressure there?
Pasi Kyckling: Thanks, Nick. That's a good question. We started to work with our pricing right after Hormuz, soon, 6 months ago. In that regard, I think the orders received since then will start to gradually convert. Then, where we don't have full visibility obviously is what happens with the freight costs going forward.
Pasi Kyckling: Currently it looks that we have reached a certain level and there is potentially some stability. But again, we read every day new developments in Middle East and oil around 110 at least over 100. Let's see how it develops. But we feel that, if we stay at current cost levels, we are relatively well-positioned going forward.
Nick Housden: Great. My second one is on India. Could you give us an update on how much of your manufacturing these days is actually in India? What is the impact of the depreciation in the Indian rupee? I mean, if your international contracts are in dollars and your costs are in rupees, I could imagine that that would be good for your margins. Just curious to hear your thoughts on that.
Pasi Kyckling: Yeah, a very good question. Thank you. India is important for us at least via three different lens. The first one is what we are discussing here, sort of a manufacturing hub. Both, we have some in-house manufacturing there, but then also third party suppliers. The second lens is simply India being a large market. The third lens is the sort of capability and competence that India can offer to us.
Pasi Kyckling: We are obviously tapping on all those three areas and are developing it. India is on top of China, the sort of, let's call it the best cost country where we have manufacturing, and China is today still more important than India. But India is increasingly important. We talk about several hundreds of millions of our supply chain on annual basis out from there. On the currency.
Pasi Kyckling: Indeed, the depreciation of rupee, at least in short term, seems to be positive and that then provides even lower cost base for us at this stage.
Nick Housden: Great. Thank you very much.
Operator: The next question comes from William Mackie from Kepler Cheuvreux. Please go ahead.
William Mackie: Yeah. Hi, good afternoon. Thanks for the time. Maybe the first question, Sami, to the bigger picture on minerals and minerals orders. It has been quite an exceptional step up in OE orders in Q2 and Q3, while the aftermarket is growing steadily. Just to understand how you are looking at this,
William Mackie: what do you see that would signal that this is going to be the beginning of a long and sustained cyclical upturn in mining CapEx, as opposed to a cluster of project awards that have come through and will pass perhaps in mid-2027, 2028? I suppose it ties into the earlier questions about your need to raise capacity. How are you beginning to think about the durability of the cycle, and what sort of signals would you expect from your customers that would give you confidence in the longevity of what you are looking at?
Sami Takaluoma: Yes. Excellent question. Thank you for that. This positive cycle started already 2025. It was driven quite a lot by gold in the beginning, and then the copper was still taking some time before it started to be visible in order books. But the pipeline perspective, it has been there. My view and our view is that this cycle is started and it has fundamentals that are quite solid and tangible.
Sami Takaluoma: Electrifications, still urbanization is driving that. On top of these things has came the data centers as such. From that perspective, the fundaments have strengthened here month by month and quarter by quarter. Our view is that we do see quite a good-looking, long-lasting positive cycle here. It is not a burst of certain things from the pipeline to be turned to the orders, because the pipeline is also getting new content in every month.
Sami Takaluoma: From that perspective, this looks very positive. We have been able to convert a lot of that market potential to our orders. We are planning to continue to do so. When it comes to the capacity question, of course, this is something that a company like Metso has been thinking already, has been done investments.
Sami Takaluoma: We are preparing ourselves for this positive cycle to continue in many different ways.
William Mackie: Thank you. Building on this last two quarters of order intake and growth in backlog, what can you give us in terms of an understanding of whether you are building a more profitable backlog rather than just simply a larger backlog with regard to visibility? How do you see aspects such as pricing, expected project returns, or shifts in the way that you are managing contract risk or payment terms into new orders as they flow into the backlog that would also be suggestive of a very favorable supply-demand balance in the industry?
Sami Takaluoma: Yes, excellent point. We definitely have taken this very much into account in our own processes, in our own thinking, and in our own planning. We are in a good position. We have already a good backlog to be delivered. We are not short of work in different parts of the company. That is, of course, reflecting also then in our pricing and the discipline that we have in our pricing when it comes to the capital cases as well.
Sami Takaluoma: We are very firm believer from the customer feedback as well that we do deliver excellent value for them, not only from the capital, but the combination of our capital and then the superior aftermarket services and products. This is something that we take into account when we set our own criterias of so-called minimum limits.
Sami Takaluoma: We stay very firm for those principles that we have set to ourselves.
William Mackie: Thank you. Maybe the last question for Pasi relates to cash conversion. We have touched on the inventory buildup and the Q2 cash development. But when you look at it, I understand you are building a service network and maintaining improved service levels for your customers. But when you look across the various elements of the net working capital, how much should we think is recoverable in Q4 as you go into the year-end? Is there typically a seasonal flow back which will support your cash for the year-end numbers?
Pasi Kyckling: Thanks, Will, for that. If we start from the seasonal buildup of our cash flow, simply looking a couple of years back, it seems that all the data suggests that H2 and especially Q4 have been the strong cash quarters. That is the way how we are also planning for this year. Cash flow is a result of, in a way, one balance sheet date.
Pasi Kyckling: Let us see how things turn around. When you talk about recovery, we rather look it from the DIO, DPO, DSO lens. What we have said earlier and continue to think is that those KPIs should not deteriorate. There may be, of course, single quarters when they move, but when we look a bit longer trends, they should be stable. In some of them, we have room for improvement.
Pasi Kyckling: When the business is growing, it may mean that in absolute terms, we need more working capital, but those are the metrics we are looking. On top of then also the simply working capital over sales, which is also a metric that we use in our quarterly report. That is a little bit how we are thinking about it.
William Mackie: Super. Thank you.
Operator: The next question comes from Panu Laitinmäki from Danske Bank. Please go ahead.
Panu Laitinmäki: Hi. Thanks for taking my questions. I have two. Firstly, on the aggregates outlook. Is it better than it was at the time of Q2 since you are no longer flagging that the European customers would be impacted by the fuel cost and the service growth in improving trends? What is the outlook there, and what would you need to see to actually guide for improvement in that market?
Sami Takaluoma: Yeah. Aggregate market cycles are faster than in the mining, and they are very regional. Very good news was that in Europe level, we started to see activity also outside the Eastern European countries, which were a driver for one year almost here for the European aggregate business. That said, it is not yet putting Europe to the level where it could be, or has been back in the days.
Sami Takaluoma: The US, which is the largest market at the moment, continues to stay in a good level. There is a very good understanding now that quite a good amount of the business drivers for our customers in the US side has been the data center business, actually. That is something that maybe continues a long time or has something slowdowns, and that kind of gives a little bit of these elements that are unknown.
Sami Takaluoma: The overall fundament is that the markets are solid and they continue to provide good amount of business also going forward.
Panu Laitinmäki: Okay, thanks. Secondly, I wanted to ask about the minerals equipment orders. How is the pricing of new orders developing, and is it possible to quantify? Are the margins in new orders now higher than they were one year or two years ago if you think about comparable equipment, for example, crushing and grinding equipment? Basically, are you able to get the margins up in new orders because the market is so good?
Sami Takaluoma: We do for certain amount. Maybe a reminder that we have reorganized our capital business since the Metso Outotec company was born six years ago, and we continue from that path. Already that means that before we had quite clear principles, how do we set the pricing? Of course, this type of demand and also our good success in the marketplace, meaning that the customers do trust our technology to be the best, especially combined with the aftermarket, is reflected in our pricing principles and in our pricing discipline as we are now.
Panu Laitinmäki: Right. Thank you.
Sami Takaluoma: All right. Since we do not seem to have further questions, it is time to thank you for participation and discussion. This wraps our Q3 2026 results conference call. It will be almost four months before we are next time discussing our results. In the meantime, I am sure we are going to see many of you on the road, and I am looking forward to that. This is it for this time, and take care. Goodbye.
Pasi Kyckling: Thank you.
Sami Takaluoma: Thank you.
Operator: The host has ended this call. Goodbye.
