Presentation of the Q3 2026 Interim Report

Good morning everyone and welcome to the FLSmidth Q3 results call. My name is Toni Laaksonen, I'm the CEO of the company and I'm hosting the call today with Roland Andersen, our CFO. And we start with the Q3 highlights. So first going into the market details. With our service business line, we saw expected development and our organic development was pretty much in line with last year with slight decline. Then on the other hand, with the products, we saw significant increase with our order intake and we grew more than 200% compared to the last quarter in 2025. So excellent development. With our products orders and we booked three bigger orders during the quarter, which we announced. Then with our pump cycles and valves business line, we saw strong performance across the board. So both the service and product side were growing organically and the total growth was 17% in the quarter. So great development with our PCV business line. Then when it comes to our revenue, we saw significant growth. Then on the other hand, with our revenue and financial highlights, our backlog delivery was strong in the quarter and organically we grew 6% and it was definitely supported by our service and PCV business lines. So we saw strong momentum in both business lines during the quarter and then the product business line was a bit below last year. Then on the other hand, the strong revenue. The performance contributed to our EBITDA margin, which jumped from 15.3 percentage points up to 16.3. So good development with our margins. And what was very positive and we are happy about this is that our cash flow jumped to the positive figures in Q3 after a bit slower quarters in the beginning of this year. And cash flow was more than 300%. 50 million DKK positive in Q3, supported by our earnings. So good financial development all in all. Then a few strategic and corporate highlights. We announced that one new member will join the executive team, Goncalo del Carpio, who will be the chief operational excellence officer for us, driving operational improvements with our IT systems in direct. Procurement and facility management. He started in this position on November 1st. We also released the intention to establish the Ford business line and the Ford business line will become effective starting from January 1st. And more about this will be released when we have the capital markets day. We also updated our 26 guidance. Based on our updated outlook, so our organic revenue growth will be expected to be 1.3% points. The previous guidance was from 0 to 4, so we narrowed the guidance down and our adjusted EBITDA margin is expected to be 16.5. The previous one was from 16 to 16.5. And now the expectation is close to this 16.5. So that's it. So good development also over there based on our financial results. Then a few words about our safety and sustainability development. Compared to the previous quarter, we did well with many KPIs. And we are extremely happy about the safety development. We have been investing in the safety trainings. Taking several improvement actions around our safety practices worldwide. And now we are seeing the results with our injury rate, which is improving. So this continuous improvement has been continuing and we are really happy about that development here. Then moving on to the markets. So as we have been saying during the previous quarters, we are expecting the investment activity to pick up in the end of this year and then during the next years. And now there are these signs of the pickup based on the orders, which we already announced during the Q3 and the similar development is expected to continue then next year and the year after. So positive momentum with the capex investments that's supported by the high commodity prices. So both copper and gold prices are still at a very favorable level, which is helping our customers to keep up with the growth. To do the investment decisions. And on the other hand, the commodity prices are driving brownfield investments, brownfield expansions and also aftermarket business. So all in all, the stable outlook with our aftermarket remains and we see that there are opportunities for growth throughout the business lines. So positive momentum in the market and very, very much in line with our expectations. Then moving on to the business lines and starting from the service business line, when looking at the order intake and that the nine months trend, we are plus 10% organically, which is great development this year. And we have been really growing the business in the long term horizon. So this is really a pickup compared to last year. Then on the other hand, we're looking at the revenue. We have been really boosted. We are boosting our revenue conversion after Q1, so both Q2 and Q3 have been clearly at the higher level than Q1, which is very positive and the total contribution is 6% organically this year. So good development with our revenue conversion and then the order intake is at a healthy level when looking at the total year to date figure. Then, of course, this revenue conversion is helping us when it comes to our profitability. So our profitability was very much stable due to this backlog execution compared to Q2. So we were within that corridor, which we have been guiding to the markets that 19 to 20% EBITDA margin with our service business line. So good development from the profit side. Profitability point of view, and this was very much in line with our expectations. Then with the products business, we saw significant order intake jump, and this was very much positive news in many ways. This is demonstrating that the investments, which we have been forecasting, are now starting to take place. So the order intake jump was very significant compared to Q2. Q3, 25, and then it also increased our total full -year order intake to the positive numbers. So good development over there and three good orders from our key customers. And the project pipeline keeps strengthening. So we are still seeing quite healthy development with the funnel. And based on the estimates, we will see that in Q4. Or then during the next year. Next year we will book more similar orders. So positive development with our outlook in the products. Then on the revenue side, we were delivering the backlog according to the expectations. So there were no big surprises. We were forecasting that there shouldn't be like positive organic growth figures with the product business line. This was fully in line with that. And therefore we were slightly declining during the Q3. But this was in line with the expectations. All in all, we can be happy about the product business line profitability. So it has been stabilizing now. And it's not anymore causing significant losses to the company. So now we are. At. At. At the zero level, which is a good result this year. And of course, when the backlog profile and backlog is increasing and our revenue level increases, we are expecting to be on the black figures. So this is a good result in many ways from our perspective. Then the last but not least, PCV business line. Here we saw strong development across the board. So strong growth with our orders, both with equipment and services, strong revenue contribution because of the good backlog execution. So organic growth across the board, both compared to the Q3 last year and then with the year to date figures. So I would say excellent development here. And we have been really expanding our installed base. And of course, that that will help us to capture more aftermarket share in the coming quarters. So healthy development here and also the outlook remains positive. Then based on the good revenue conversion, we also had healthy margins with PCV and the margin profile remained at the same level compared to last quarter. So about 23 percent, and it was slightly impacted by the mix. But also in line with our expectations and a good result from the business line. So strong development with PCV and similar development expected in the coming quarters. And now over to Roland. Thank you for that, Toni. I was being told that the beginning of the meeting was a little noisy in the sound, but we have decided to move on. And then I suggest we just accept a few extra questions. If something was unclear or not necessarily heard of in the very beginning. So we continue with the consolidated financial performance. Our order intake on company level of 4 .5 billion is up by 36 percent nominally. And our revenue of 3.8 is up by 10 percent compared to same quarter last year. Gross forfeit margin is relatively high. And all that. Leads to an adjusted EBITDA margin of 16.3. And a net net profit and loss for the period of 388 million. So gross profit remains relatively high, 35 percent. It's obviously impacted by a positive max mix for the company. Over 80 percent revenue coming from service and PCV for this quarter is good for the gross profit. Our SG&A cost declined slightly in Q3, both compared to last quarter, but also same quarter last year. And the increase in revenue gives us a slight improvement in the SG&A ratio and thereby scaling benefits. All that yields our EBITDA margin of 16.3 percent. Our net working capital ratio remains stable for the quarter. We continue to slowly increase our inventories as our PCV business is building out the service center reach and also our service business line is moving closer to the customers to secure continuous growth and faster turnaround with the customers. And we continue to deliver the existing projects. And we continue to deliver the existing project portfolio with the structure of milestone payments coming in slightly slower than would be the case as we move forward. And this also means that our operational cash flow became 358 million, predominantly driven by solid earnings, deducting our investment activities a free cash flow for the quarter of 249 million Danish kroner. And that means that our leverage remains low at 0.7x. And that provides room for our continuous organic growth initiatives and also bolder M&As. And as Tony mentioned, we decided to adjust our financial guidance. EBITDA margin adjusted to the upper end of the former range of 16.3 percent. We now say that the year will end with an adjusted EBITDA margin of 16.5 percent. And the organic revenue growth range is narrowed from previously 0 to 4 percent to now 1 to 3 percent organic growth for the full year 26. If you look a bit on the guiding assumptions below that, we maintain an expected growth rate for the service business line of 3 to 5 percent. For the full year 26. For the full year, products is narrowed to minus 9 to minus 13 in revenue growth and PCV is up quite a bit from 5 to 8 percent organic growth to now 9 to 11 percent as they seem to be coming in with a reasonably strong Q4. And this at this point in time, if we apply the forex rates from yesterday, there will be next to no full year FX headwind and our organic growth. Revenue will equal our reported revenue growth. Let's see about that. And then the EBITDA margin bridge from 16.5, we will have adjustment items of about 1 percentage points. And then we have other operating income, which is predominantly the sale of our value office. And that will bring us to a full year EBITDA margin of 20.5 percent. And with that, I hope to see some of you on Tuesday, 17th of November at 1 o'clock p.m. In our offices here in Copenhagen for Capital Markets Day. And with that, we will move over to Q&A. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone. If you are using the speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Thank you. The first question comes from Cheat Sina. With JP Morgan, please go ahead. Hi, good morning, Tony and Roland. Three questions from me, please. So, firstly, obviously, on the product order side, really strong momentum here. And it's very encouraging that you're suggesting that this momentum will continue. Previously, you used to speak about kind of base level order intake of about 400 to 700 million and then large orders on top. Given the modern momentum that you're seeing and what you're seeing in the pipeline, could you maybe provide a bit more, you know, color as to the run rate we should now be expecting? That's my first question. Yeah, so, of course, we will see some of these bigger orders coming on top of the baseline. We don't expect that the baseline volume would significantly change. So, we keep that expectation. And then any larger orders might. But then come on top of that. So, baseline volume should be stable. Thank you. And just to actually follow up on that. So, should I be expecting then a 1.4 billion sort of run rate, including the large orders? And actually, I mean, just a clarification on those large orders. I think, you know, the sum of the three announcements that you'd made was about 760 million. But you mentioned 585 in the release. Is some of this supposed to be booked in Q4? Just a clarification on that. So, I think, Chet, thank you for that question. So, the base order is a sort of a run rate assumption, 4 to 700, right? And then the big elephants will come on top. And Q3 was clearly a good quarter, a strong quarter. And that will be lumpy from here. There will be more of those orders, but it won't be a new normal. Okay, thank you. And then maybe the second question on services. I think you'd flagged that we might see fewer mods this quarter versus the H1 run rate. But is this expected to change into Q4? So, when starting from the Q4 figures, I would say that, of course, the comparison point there is pretty high from our perspective. So, that's, of course, impacting on the expectation level. So, in the short run, when comparing to Q4. And what might happen over there, we are not expecting anything like a significant uptick or something like that. Most likely something that which is in line with the quarter or slightly below. And therefore, we released the revenue forecast as well. So, that we are not indicating significant growth with the service business line. So, the comparison quarter will be strong. And that's something that we are taking into account. Then we will tell more, of course, on the long-term outlook when we have the capital markets day. But briefly saying, we are expecting that the market remains healthy with the services. So, there we also have sometimes this slight transition between the quarters when it comes to our orders. And that we saw now in Q3. Especially in Q4. Especially with the upgrades and modernizations. So, nothing major over there. The profile with our orders was in line with the expectations. Very clear. Thank you. And my final question is just on cash development. Maybe the Q3 came in slightly more positive than we'd expected. So, does this change anything for the full year? No. No. So, we'll still expect the CFFO to be up to 700 or so. Yeah. Thank you. The next question comes from Christian Hinderaker with Goldman Sachs. Please go ahead. Good morning, Toni. Good morning, Raelyn. Thanks for the presentation. I want to start on the products business, if possible. If I look at your last 12-month trailing orders there, they're up about a billion from where we were last quarter, so a notable improvement. The first one here is then when we think about the potential future project tenders and I guess what's out there in the market, how many project opportunities do you see in the next two years that could be north of $100 million in scope? And then secondly, when we think about the flow-through of that increase in your last 12-month orders, obviously that's driving a better margin. How do we think about margins as your revenue scales into next year? Yeah, so when thinking about the margins, one big thing there is that our revenue level per quarter. So if we exceed that threshold level, then of course it provides us leverage, which is then helping us with our bottom line. We are not expecting that there's like a massive change jump with the product's gross margins, but then the bottom line will be helped through this leverage impact. So that's definitely something that we consider in our financial models. Then when it comes to the orders, as Roland mentioned, this is still lumpy. So for instance, now when we saw these three orders coming, they have been in our pipeline, they have been long in our pipeline, but we just didn't know. We didn't know that when the final investment decision happens. There are similar orders and even bigger ones in the pipeline, but of course there's a lot of uncertainty on the timing when it comes to the quarters. But the expectation is that similar orders will be booked next year and even the year after based on the backlog, which we have in the sales pipeline and funnel. But then, of course, these will be delivered. In the end of 2027, 2028 and 2029. So the profile is such that we don't deliver these immediately. It's one to two years before we deliver. The next question comes from Lars Topholm with DNV Carnegie. Please go ahead. Yes, also a couple of questions from my side. The first one goes to the order backlog in products. Your order intake is three quarters of a billion higher than your sales, but the backlog is only up by half a billion. I just wonder why that is. Yeah, so there has been a few, there's a little bit of FX noise in that. Then there has been a few de-scopings that takes the backlog down a bit. Okay. Can you comment more on the de-scoping? Yeah, so that, you know, if you do a contract or a project delivery order of certain things that have to be done, we have to do the whole thing. The customer may come back and say either this thing is not to be done either, or we have somebody else doing it. So then we'll be de-scoping, adjusting the order. So there's been a few adjustments of that. That's normal. Okay. Thank you very much for all. And that's it. Then a second question goes to a comment. We are group made on their Q3 explaining that they had been negatively affected by severe weather in Chile. Has that had any impact on your Q3 in any of the divisions? No, we haven't seen any impacts like that in our business. Okay. And then a third and final question. So last week, report made final investment decision on Baghdad. And in that context, I just wonder if you can talk a little bit about your existing relation to that specific mine. And then from an educational perspective, what kind of time lag should I expect between FID and award of equipment packages for a project like that? So I would say so that, in general, Freeport, of course, is a big customer to us. And we are doing a lot of business with them globally. And they are buying a lot of aftermarket services and equipment from us. But we cannot comment on the individual mine sites as such. If there's something to release around that individual mine site, then we will publish that in the future. But there are no news at the moment from our side. But it is correct that the existing concentrator contains Eiffel-Schmidt equipment, isn't it? Yes, it might contain, but of course, this is also something that the customer should publish, not us. That's fair enough. Thank you very much. Thanks for taking my questions. The next question comes from Tore Fangemann with Bank of America. Please go ahead. Good morning. Thank you for taking my questions, too, from my side. The first one would be on the service business. And thinking here about 2027, given that we are already in our year to date, and also already in 25, at a fairly high level of mine utilization, would it be fair to assume a normalization of growth rates towards, like, more mid-single-digit level going into 2027? Thank you. Yeah. So these growth rates, we will be commenting more on Tuesday in the Capital Markets Day. So we will release more information on them in line with that one. So further information to follow on that. So at this point, we will not share for more information. Around the business line specific, like a mid-term outlook. Very fair. And then the second question would be on the outlook, generally on modernization and upgrades. A lot of equipment has been installed, like 12 to 14 years ago roundabout. And especially for the upstream players, we do see a lot of demand for modernization and upgrades right now. Is there a specific reason why this is less of a driver for you? Thank you. So as we commented on the general mining outlook, these type of like upgrades, modernizations after market and also equipment investments are needed. And we are also getting our fair share. It's more about the timing, what we commented related to the Q3 results. So we have a significant modernizations and upgrades business within the service business. line. And we have been seeing healthy development there, because that the miners really want to invest in their brownfield assets. Okay. Thank you. Just just one last follow-up. I think you touched on it briefly before. Just wanted to clarify if you when you think about the revenue delivery, I mean the conversion of orders into revenues. Is it fair to assume that lead times might get a little bit longer from here? Or should we continue? To assume around one to one and a half years? Still just thinking and one of your recently announced large orders. I think you flag that delivery will be around 2029 to 2030. So quite far out. Thank you. Yeah, so that's a good question. Thank you for that. We we actually trying from now on on the bigger tickets to to put in the releases when revenue is expected to kick in. Right? So on the faster gold project we had in us that will be 27. 28, but on the bigger tickets with longer lead time on the equipment and also where the customer needs to be ready. There may may only be revenue in 29 and 30. So it's a bit of a wide range. I know you can't necessarily use that as good, but technically we have received an order in 26 where the last piece of revenue comes in 30. So it can be everything from 12 18 months up to 36 plus and we will try to be precise. Hopefully when a few more bigger tickets comes in. Really appreciate that. Thank you. The next question comes from Klaus Almer with Nordea. Please go ahead. Thank you. Yeah. Also a few questions from from my side. First of all, congratulations with a very strong quarter again. So when we look at at the. Product segment and the ramp up you are probably in the process of making is this a challenge when you are, you know, doubling your your your orders and how may it actually also impact your cash flow? That would be the first one. So first of all with the orders we operate so that we have certain Milestone payments with the larger orders and when the project and delivery proceeds, we voice that the customers accordingly to the balance that the cash flow and then on the other hand with the products we have pretty healthy mix so that when it comes to our supplies so that we also have a lot of external supply capacity to balance the then the deliveries so that we will utilize our own manufacturing in full and then also the suppliers and this this also helps when managing the cash flow. Because we don't then need to release that the bigger POS before we receive that the Milestone payments from the customers. So these three large orders announced after the end of the quarter. Does that mean these Milestone payments will come in Q4 or did it actually come in Q3 or will it be 2027? So so that that's a little dependent on the on the orders, right? Because some of them come with an engineering part up front, which is a small ticket and then the Milestone payments come later and some will come further up front. So I think don't expect too much in Q4. Right. Okay. And then, you know, on the same topic permits. So what is the demand for permits? Do you know it is starting to get easier? And also is there any difference across the world? And I'm mostly looking at this large downfield projects. Yeah. So on the permits, I would say so that that for instance, these projects which we booked they have been in the permitting process for a long time. So they were in our pipeline for significant amount of time. So we knew well in advance that what would be the timing if the customer just gets there. The final approval. So the permitting process that takes still long, so it hasn't changed. But what has changed is that many governments are positive towards the mining investments. And then when the environment is stable in the country, then the miners are more willing to to initiate an action their projects and that we are now seeing in many countries like in in Chile, Peru in the US and so on. And that this positive momentum created by by the governments that that's really picking up and therefore the investment decisions are done. Could you say that this is kind of a catch-up effect? There's a lot of projects being sitting in the permit phase and now with the various government being more positive, you will see more projects coming through? Correct. That's absolutely correct. So and some of the projects, have been delayed because of the the instability in in in certain countries and now when they're stable environment and governmental support, the miners are proceeding ahead. Okay. Thank you so much. The next question comes from Kastar Blom with Danske Bank. Please go ahead. Thank you very much. And also, congrats from from my side. Great to see another good quarter. I have two questions. The first goes to your M&A agenda. You have previously been quite outspoken that you have an appetite to to do acquisitions. And I also think you've talked about potentially securing one or two deals here in 2026. Is that still on the agenda or are things being pushed a bit into next year? And secondly, on the networking cabinet, working capital and all. And as you said, it was was pretty flat quarter or quarter. But when we look at it year over year, of course, you have roughly a doubling in the in the working capital and you talked a bit about it last quarter. Also that there were some milestones that were not coming as quick as we were used to maybe some some receivables from customers. Can you give us a bit of an update on how we should think about this development into into 2022? into into 2027? If there will be a new more normalized level for working capital, obviously also expecting respecting that you'll probably talk more to this next week also. Thank you. Okay, maybe I'll start with the M&A topic and the Roland continues with cash flow. So with the M&A activities, I would say that we continue with the Bolton cases as we have been saying and the expectation, is that there are good cases in the funnel and hopefully we can announce something in the coming months. But of course, it depends on on the sellers as well that what will be the final timing. Then we will tell quite a bit about the M&A agenda as part of the capital markets day. So there we will release more information that what type of targets and companies we are looking for. From which fields and so on. So it's still on the agenda and further information will follow on Tuesday. Yeah, and then there was a bit on working capital. So thank you for that Casper. I think what we continue to do is to slowly but surely expand our reach in the pump business line and also in our service business line and that requires a disciplined inventory build up. On the milestone payment. We're currently executing a number of projects that was not having a contractual structure where the milestone payments came in fast enough. So that that will change as we move forward, especially also if we get more bigger tickets in which we hopefully do in the coming years. We need to make sure that our work in progress and our milestone structure will give us a more balanced cash flow and work in progress balance. So a much more disciplined approach to that as we move forward for 27. We're still expanding inventories. We will still be delivering the projects under execution. So it's a little bit of a transition here. We'll talk a bit more about that on Tuesday. So don't expect it to come come all the way back in 2027 and other thing when you compare to a year ago. Cement was in and cement was always working capital negative. I positive for the company for some reason, but then they ended up not making profits. So that was not so great either. We have put in or put in the networking capital level by end of 25. That's the first real relatively clean data point and compared to that. We are up by 45 or 50% or so and that's more the starting point. So more more on that on Tuesday. Thank you appreciate that. But I just wanted to to follow up with when you say that that these projects where the milestone payments have probably not been been perfect. Is this still projects where that was sort of booked years ago? And are we already on different levels for the projects that you have booked more recently? Yeah. So so yeah to both it's one or two years ago. Stay they were booked and the structure has changed as we speak. Thank you very clear. Again. If you have a question, please press star than one. The next question comes from David Farrell with Chase Jeffries. Please go ahead. Hi, thank you. Thanks morning base. Just one question for me. Just trying to understand kind of the competitive landscape around color products going forward. What level of competition you see there and then when you think about pricing this, how do you think about the initial OE value versus the aftermarket? Are you looking at this in terms of how many years worth of aftermarket you need to capture in order to generate a sufficient return? Does that factor in? So how you think about the pricing of the OE? Yeah. So starting maybe from the the orders such so from our perspective, what we are aiming to do and for further information, of course on this will follow on on Tuesdays that we try to sell both the capital equipment and the services at the same time already before the site is ramping up or the expansion and we released now. One. Bigger order with this approach, which is from India where we are now delivering this full five-year life cycle service agreement in connection with the site ramp up and it's a pretty significant one and that that's something that we have been now changing with our approach. So there will be more ramp up services more process support services available already. When the equipment are delivered and then on top of that, we want to help the customer to produce more and more sustainably and that we can do by offering these life cycle services throughout the life of mine. So that thinking is definitely something that we want to to increase even further and there will be news around this this approach then on Tuesday. So therefore, we see it so that it's also a competitive advantage when competing against certain peers. And then when competing with the peers, we also have a strong flow sheet offering with which helps us not too many peers are having such such product offering available. And then we have like full process expertise to design the flow sheets and optimize them. So this combination is to me pretty powerful. And it helps when when competing with many of the peers. Okay, that's really useful. Thank you. The next question comes is a follow-up from Christian Hinderaker with Goldman Sachs. Please go ahead. Yes. Thank you for sitting in my my follow-up. I just wanted to come back on OE. Has the pipeline expanded? Now versus 12 months ago? Obviously some of these orders that have come through have been in the sort of opportunity set for some time and are now being FID. But I guess as we think about the opportunities ahead, I'm curious on the momentum there. So that the pipeline is a bit stronger than in the past and there are more projects closer to the FID phase. So there are more projects which are very close to the final investment decision? So that that's maybe the biggest change with the pipeline. And it is very much in in line with the expectations. So as we have been continuously saying we expect that the end of this year should be active and then that the coming years 27 and 28. So therefore we believe that the similar orders will be then booked in. the coming quarters but of course the timing is such that we cannot predict that in detail and then like we have been saying further information on the outlook will follow on Tuesday when we present the full materials and strategy and our midterm targets very good looking forward to that that was the last question I would now like to turn the conference back over to the management for any closing remarks yeah thanks for joining the call it was a pleasure to have you online and as Roland mentioned welcome to the investor day on Tuesday we hope to see many of you online and here in Copenhagen so and thanks for joining the call have a nice day Thank you.