Sandvik Posts Record Profits as Tungsten Windfall Complicates Machining Margins While Diemme Filtration Deal Signals New Growth Vector
Q2 2026 earnings call, July 17, 2026
Sandvik delivered what CEO Stefan Widing called "a very strong quarter with record revenues and profits," but the headline numbers mask a more complicated story about tungsten price dynamics that investors will need to unpack carefully before extrapolating margin trends into the second half. Total order intake grew 17% (13% organically at the group level, though Widing initially cited 70% before the transcript correction), revenues rose 24% (23% organically), and adjusted EBITDA hit SEK 8.3 billion, up from SEK 5.6 billion a year ago, for a margin of 22.6% versus 19%. Free operating cash flow came in lighter than the headline numbers would suggest, at SEK 3.6 billion, representing only 46% cash conversion, which CFO Cecilia Felton attributed to the sharp ramp in invoicing rather than any underlying deterioration.
Tungsten Windfall Is Real But Fading Fast, and the Math Is Messier Than It Looks
The most consequential new information from this call concerns the mechanics of Sandvik's tungsten exposure, which is currently flattering machining margins in a way management explicitly warned analysts not to extrapolate. Machining division profitability nearly doubled year-over-year to SEK 4.2 billion, a 28.7% margin, but SEK 550 million of that, equivalent to 380 basis points, is a temporary timing effect from selling tooling at current market prices while having bought raw material (largely recycled tungsten powder) at cheaper levels. Strip that out and the underlying margin sits closer to 25%, still strong, but the number is set to compress further. Management guided to only a SEK 200 million net tungsten benefit in the third quarter, a sharp step-down from SEK 550 million, which prompted pointed pushback from RBC's Sebastian Kuenne, who noted that with a 9-month raw material lag in cutting tools, the windfall should arguably be rising, not falling. Widing's explanation centered on the shape of the price curve itself: "the tungsten prices, they went up, they were creeping up in the fall, but they had the major kind of rise in Q1. So it was during one quarter... after that, they have leveled out." On the cutting tools side specifically, the company is actually running margin-dilutive on price versus raw material cost currently, a fact confirmed under direct questioning from Bank of America's Alex Jones, because Sandvik's three-month price notification lag means it is still catching up to input cost increases from earlier in the year. Widing was blunt about why more price increases are coming regardless of where spot tungsten sits today: "there will be more price increases coming. We don't see that... that should be fairly obvious." Investors modeling this line item should note management's own admission that the quarter is "basically impossible from an outsider to predict," given that averages mask intra-quarter volatility in a market that moved several hundred percent in some tungsten proxies.
Diemme Filtration Deal Opens a New Growth Runway in Mining Downstream
Sandvik's acquisition of Italy-based Diemme Filtration, announced during the quarter, represents a deliberate strategic expansion into filter presses and dewatering, a segment growing around 15% annually, faster than core mining, and driven by regulatory pressure on mine operators to de-risk tailing dams. Diemme is described as the market leader in a segment with a SEK 20 billion core addressable market, generating roughly SEK 1.1 billion in expected 2026 revenue with accretive margins and a higher aftermarket mix than Sandvik's existing business, the exact profile management says it targets. The deal will form the base of a new filtration division within Rock Processing and follows the 2023 Schenck acquisition that added screens to Sandvik's crusher lineup. Widing was careful to temper expectations for rapid follow-on dealmaking, telling Morgan Stanley's Max Yates that Sandvik will likely "consolidate that for a while" before pursuing further bolt-ons in adjacent categories like high-pressure grinding rolls or slurry pumps: "I wouldn't expect you to expect something like this every year. We want to build it slowly but steadily. And we're in it for the long term. I think mining will be a good business 30 years from now as well. So we're not in a hurry."
AutoMine Gets a Full Platform Rewrite With 3D Navigation
Sandvik launched AutoMine Aura, described as a complete rewrite of its automation platform onto a modern technology base, adding real-time 3D mapping capability that replaces the 2D navigation systems currently standard in automated mining equipment. Management said the upgrade, already validated by customers in live environments, allows automated equipment speeds to increase by more than 15%, a meaningful productivity claim given automation and digital mining technologies are now cited as a primary driver of the aftermarket strength discussed below.
Mining Aftermarket Growth Hits 17%, But Management Flags This as Cyclically Elevated
Mining order intake crossed SEK 20 billion in a single quarter for the first time, with aftermarket revenue, parts, services and digital technologies, up 17%, a figure Widing called "quite exceptional." Drivers include high customer production rates, an aging equipment fleet requiring more maintenance, and a shift toward more advanced machines that management says are stickier from a service perspective because competitors struggle to service them. Importantly, when JPMorgan's Chitrita Sinha and Bank of America's Alex Jones pressed on sustainability, Widing was explicit that this pace should not be treated as the new baseline: "we stick to our long-term guidance of high single digits... if you take a long-term trend view, I would say you should put high single digits." That is a meaningful signal for anyone modeling forward aftermarket growth off the current print.
Cutting Tools Growth Is Partly a Prebuy Effect, Not Pure Demand
Machining order intake grew 29% (30% organically), with cutting tools orders up 20%, but Widing unpacked the composition in unusual detail: roughly 7 percentage points reflects customers prebuying ahead of anticipated further price increases, with underlying market-driven volume growth closer to high single digits once restocking and roughly 1 point of market share gains are stripped out. This distinction matters because it suggests reported order growth in this segment is running ahead of true end-demand, a gap likely to normalize as the tungsten pricing cycle stabilizes.
Rock Processing Margins Still Below Target Despite a Rare Large Order
Rock Processing order intake rose 8% (7% organically), helped by an unusually large SEK 173 million order from LKAB, which Widing flagged as a sign the broader downstream offering is winning bigger contracts. Still, division profitability of SEK 392 million and a 14.6% margin remains below where management wants it structurally, though it improved sequentially from a weak first quarter. Mining division operating leverage came in soft at 25% versus a normal 30%, which Felton attributed entirely to one-off litigation settlement costs and closure costs tied to a South African diamond mine, characterizing both as non-recurring rather than a trend.
Guidance Signals and What to Watch Into the Second Half
Management left full-year CapEx, interest net, and tax rate guidance unchanged, with a normalized tax rate of 24.2% in the quarter. Currency is expected to be a modest SEK 200 million tailwind in the third quarter based on end-June rates. On large mining orders, Widing declined to characterize the SEK 2 billion-plus level seen this quarter as a new normal but said the project pipeline remains active enough that further large orders are plausible. The powder business now represents 19% of machining invoicing, a data point management provided for the first time to help analysts model the segment split, though it declined requests to break out the tungsten timing effect between the powder and cutting tools businesses individually, or to disclose historical quarterly powder share trends, leaving some of the modeling ambiguity flagged by Rothschild's James Moore unresolved for now.