Sandvik (OTC:SDVKY) reported second-quarter financial results on Friday. The transcript from the company's second-quarter earnings call has been provided below.
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Summary
Sandvik reported a strong second quarter with record revenues and profits, including a 17% increase in total order intake and a 24% rise in total revenues, with an adjusted EBITDA margin of 22.6%.
The company announced a strategic acquisition of DM Filtration, entering a new market segment in mining filtration and dewatering, which is expected to have a growing market driven by regulatory trends.
Sandvik launched new products, including a new generation of AutoMine with 3D mapping, enhancing automation solutions, and inaugurated a new innovation hub in Pune, India, to support digital growth.
The company provided guidance with expected positive currency effects in Q3 and maintained full-year guidance for capex, interest net, and tax rate.
Management highlighted strong financial performance despite macroeconomic uncertainties, with significant strategic progress in expanding their product offerings and capturing market opportunities.
Full Transcript
Luis Cheddar, Head of Investor Relations
A warm welcome to Sandvik's presentation of the second quarter results 2026. My name is Luis Cheddar, head of investor relations here at Sandvik and beside me I have our CEO Stefan Verding and CFO Cecilia Felt. We will, as usual, start with the presentation. Stefan and Cecilia will take you through the highlights of the quarter and after that we go on to the Q and A session. So without further ado, over to you, Stefan.
Stefan Widing, President & CEO
Thank you, Luis, and welcome also from my side to the second quarter report presentation. To summarize the quarter, it was a very strong quarter with record revenues and profits. We see strong momentum across key regions and segments, as well as also good price realization, which is of course very important in the current environment. Total order intake grew by 17% and organically we grew by 70% as well. Total revenues increased by 24%, but organically 23%.
Adjusted EBITDA came in at 8.3 billion, up from 5.6 in the prior year period. This corresponds to a margin of 22.6% up from 19%. And rolling 12 month EBITDA margin is now 20.4. Adjusted profit for the period 5.8 billion, up from 3.7. And the free operating cash flow came in at 3.6, corresponding to a cash conversion of 46%. This is on the lower side, but it's driven of course by our significantly higher invoicing and we'll go through the components of that a little bit more throughout the presentation.
We'll start with highlighting the acquisition we announced in the quarter, which is very strategic for us, the filter press manufacturer DM Filtration, which is based in Italy. This means that we are entering a new market segment in mining, filtration and dewatering. And this will also form the base for a new filtration division within rock processing. We have said for a number of years that we have a strategy to grow in attractive niches in downstream mining.
We started three years ago with the acquisition of Schenck to complement our crushers with screens. And this is now these next steps we're taking as we also now go down into filtration and dewatering. This is a very attractive business. Besides the structural growth in mining, filtration is growing even faster. This business market that they are in is growing around 15% per year, driven also by regulatory trends. Where mine operations want to de-risk the tailing dams and also to get the permits to operate the mine, they increasingly move to filter presses instead.
And you need large filter presses for this and in this segment, the infiltration is the market leader. They have a total addressable market of 20 billion in their core offering. If we add also adjacent offerings that they have, it increases further good growth. As I said, the company has revenues of 1.1 billion expected this year. Accretive margins and a high share of aftermarket. So all the attributes that we would like to see in what we call then the attractive niches in downstream mining.
So a very strategic acquisition for us in the quarter. Other key strategic highlights in the quarter listed here, Dormer Prawmet released a new turning grade with increased tool life and productivity for our customers. This is an important launch for us to capture the growth opportunities we see in the mid market. And then very important is completely new generation of auto mine called Auto Mine Aura. This is a complete rewrite of the automime platform.
So making sure we are on the latest and the modern technology platform that can scale for the future. It also adds a significant new feature such as 3D mapping in real time. Currently today the automation solutions used in mines have a 2D navigation system. Going full 3D means that we can in real time map the tunnel of the mine. We can see things like potholes and rocks on the ground. And overall it means we can increase the speed of the automated equipment by over 15%.
And this has also been validated by customers in their natural environment. So really important new technology step for us in Automind to make it easier to deploy, easier to use and increase productivity further. And then intelligent manufacturing in collaboration with Machining have inaugurated a new innovation hub in Pune, India. This is a good talent pool not only for software and AI staff in general, but also for CAM engineers. There's a lot of CAM software companies there, CAD and CAM I should say.
So it's a good place for us to have a new innovation hub that we expect to scale up to around 400 people now in the midterm. So an important part in growing our digital offering.
Cecilia Felt (Chief Financial Officer)
With that I hand over to you, Cece. Yep, thank you, Stefan. All right, so let's dive into the numbers then in a bit more detail together. And as Stefan mentioned, we had good growth on both orders and revenues. Orders reached 37.8 billion and revenues 36.8 billion. Adjusted EBITDA came in at 8.3 billion which then corresponds to a margin of 22.6%. Looking further down in the P and L, the net financial items came down year over year. I will show you a bit more details on the development there in a few minutes.
And the tax rate excluding items affecting comparability and also on a normalized basis was 24.2%. Net working capital continued to trend downwards. On a 12-month rolling basis, we are now at 27.5%. And it's an improvement, as you can see here, of 2.1 percentage points compared to last year. Free operating cash flow came in at 3.6 billion and this corresponds to a cash conversion of 46%. You can also see here that ROCE improved year over year and also that we had good growth in adjusted EPS.
As I said, adjusted EBITDA increased year over year. It reached 8.3 billion. It's an increase of 48% compared to last year. And this is driven by a combination of higher volumes, strong price realizations, and cost savings. And then as Stefan mentioned, we also have this timing effect from the tungsten price development. 550 million in the quarter and at group level that corresponds to an in-quarter effect on the margin of 150 basis points. So good organic leverage of 40% currency was diluted by 50 basis points.
And on a 12-month rolling basis, the adjusted EBITDA margin is now at 20.4%. If we continue with the EBITDA bridge then, and as usual starting with the organic column here, you can see that revenues grew by around 7 billion and adjusted EBITDA by 2.8 billion. And then as I said, this gives a leverage of 40% and an accretion to the margin of 4.2. Currency was dilutive by half a percentage point and structure was neutral. Which then brings us to a margin of 22.6%.
If we continue down the P and L, looking at the net financials, it came down year over year to 254 million. And as you can see here in the table, this is driven by a lower interest net which is a result of lower borrowed volumes. The reported tax rate came in at 25%. But if we exclude items affecting comparability and then also on a normalized basis it was 24.2%. So within the guided range for the year. Looking at the balance sheet then and starting with working capital, as I said, we continue to trend downwards in relation to revenues.
As you can see in the blue line here on the left-hand side and on the right-hand side you can see that the improvement was driven by all business areas in the quarter. Free operating cash flow was 3.6 billion as I said, corresponding to a cash conversion of 46%. And if you look at the graph here on the left you can see that on a 12-month rolling basis cash conversion is now at 80%. And in the table you can see the year over year development where EBITDA adjusted for non-cash was significantly higher compared to last year.
Capex was largely in line, a slight increase. And then you can see the impact of the net working capital buildup. Financial net debt increased sequentially from Q1 into Q2. This was driven by the dividend payment in May and that also resulted in a slight uptick of financial net debt over EBITDA. So we're now at 1. Capitalized leases were largely unchanged in the quarter. Pension liability came down a little bit driven by higher discount rates and all in all then a net debt of 37 billion.
Looking then at outcome versus guidance you can see currency it came out at minus 173 million. And then on a year to date basis capex is now at 1.8 billion, interest net at 0.3 and the normalized tax rate at 24.1. And looking ahead then at the third quarter and full year here, if we start with the third quarter we expect a positive currency effect of around 0.2 billion. And this is based on the currency rates per the last of June. We also expect to continue to have a positive timing effect from the development of the tungsten prices.
And in the third quarter we estimate this to be around 0.2 billion. And then for the full year we have left guidance for capex interest net and tax rate unchanged. And with that I will hand back to you Stefan.
Stefan Widing, President & CEO
Thank you. Going into the conclusion then to summarize the market and macro environment we continue to see strong momentum in mining, recovery, in demolition and recycling and aggregates during the first half of the year. We also see improved sentiment in general industry and continued strong demand in several other segments such as aerospace and defense. Then of course the political and macroeconomic environment is very uncertain. With everything going on in the world we don't see an impact of that as of yet.
The trends we are seeing is underlying positive but of course this creates increased uncertainty. Our financial performance is very strong in the quarter order intake and revenues grew double digits. We have record profit and margins above our target range even. And if we look at the unadjusted EPS, the growth in the quarter was 63% and over 50%. If we look at the adjusted number, which is of course a very strong development. We continue also to make strategic progress.
We have entered the filtration and dewatering segment with the acquisition of DM filtration. We have also strengthened our leading electric offer with our first surface drill rig that is electric. It's a top hammer drill. Also shown here, a number of other innovations that we have launched in the quarter. We continue to execute on our strategy which also means consistent delivery every quarter. While we are continuing to build Sandvik stronger in the long term.
I think we have shown in this quarter that we are capturing key business opportunities and responding quickly to both market and customer needs. Sandvik continues to be a very strong platform with a strong culture and the mindset where we are winning together. Thank you so much. Let's head to the Q and A.
Luis Cheddar, Head of Investor Relations
Thank you Stefan and Cecilia. Yes indeed. It's time for the questions. So operator, we can take the first question please.
OPERATOR
We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on a touch tone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue you may press star and tone. Participants are requested to use only handsets while asking a question. Anyone who has a question may press star and one at this time. The first question comes from the line of Sitri Dasina from JP Morgan.
Please go ahead.
Sitri Dasina, JP Morgan
Yeah, hi Stefan, Cecilia. Thank you for taking my questions. I have two if I may. The first one is just on the machining margin as you said. If we strip out the impact of the 380 basis points relating to tungsten, then the underlying margin should be 25%. Clearly a very strong result. With regards to the guidance for Q3, this is obviously very helpful that you've provided. But all things being equal, should we expect a 25% margin to be the underlying level or is there anything else that we need to be aware of?
Thank you.
Cecilia Felt (Chief Financial Officer)
I can start and Stefan if you want to add something there. I mean when we break down the margin for this quarter then we have the temporary timing effect has a positive in-quarter impact of 380 basis points and as you said that will then come down as per the guidance. For Q3, what will remain is still good profitability in our tungsten mine. At these high tungsten prices we also get good fixed cost absorption in the powder division. And then on the cutting tool side in the second quarter, price versus inflation was still a bit dilutive.
And then it's of course very much volume dependent.
Stefan Widing, President & CEO
But no surprises.
Sitri Dasina, JP Morgan
Okay, thank you. My second question is just relating to the aftermarket development in mining. Can you please elaborate on the drivers of the 17% year on year growth as this is now the second quarter of double digit growth now here this year?
Cecilia Felt (Chief Financial Officer)
Yes, as we also mentioned, the primary drivers are parts and services and digital technologies. Digital technologies has very good growth driven by automation and Deswik, which is mine planning software. Parts and services is driven by a number of things. Of course, customers are using the equipment to the fullest extent. We have an expanding fleet. We talked about that before. Also, the fleet is fairly old. All of those things are driving aftermarket demand production services.
Also the fact that the fleet we are now putting out there is more advanced machines which tends to also increase the aftermarket per machine because it's more advanced and it becomes more sticky in terms of the aftermarket coming to us since it's difficult for others to service that type of equipment. Then we can also say that on the consumable side, meaning the combination of rock tools and ground support, it was also a good development in the quarter overall.
So yeah, I could simplify it and say it's across the board, but those are the specific drivers.
Sitri Dasina, JP Morgan
Sorry, just to follow up on that, is that development different by commodities or is there anything notably different versus on the equipment side?
Cecilia Felt (Chief Financial Officer)
No, I wouldn't say there is a commodity aspect to that. Of course, if you have a commodity, that's where you don't want to mine. It would have an impact. But today, even though it varies a bit, all commodities or most of the commodities are at good levels, especially the commodities related to underground.
Sitri Dasina, JP Morgan
Super helpful, thank you.
OPERATOR
The next question comes from the line of Alex Jones from Bank of America. Please go ahead.
Alex Jones, Bank of America
Great. Thank you for taking my questions too as well. Please. Maybe first, just to follow up on that service question, is double digit sort of order growth now the level you would expect and we should expect for that business, given all of those drivers that you just highlighted? Or is there anything sort of exceptional about this quarter in particular that means we should expect a slight normalization?
Cecilia Felt (Chief Financial Officer)
I mean, we stick to our long term guidance of high single digits. We have now a period behind us with higher growth than that, but I think at some point it should, it will probably normalize some around the more high single digit because that's what we see as a sort of a long term sustainable pace. Now there has been a number of these things. You know, with high production rates, we're converting the fleet from maybe a little bit more older equipment to newer equipment.
So maybe there are some additional boosts here or there are, I cannot say. Or we are not guiding for either how long that could last, so to say. I mean it's up to you how long you will want to pencil in the double digits. But if you take a long term trend view, I would say you should put high single digits.
Alex Jones, Bank of America
Okay, understood. And then maybe just on machining profits, I guess if I exclude that timing effect, your profits in the business are up about 70% year on year. Can you just pack sort of what the most important drivers of that are and you know, the ones that are a bit less important. It seems to me as though volume growth in cutting tools isn't especially high at the moment. So you know, the tungsten mine profitability versus some of the market share gains versus cost absorption.
Just to help us understand which are the key ones driving that 70% growth. Thank you.
Cecilia Felt (Chief Financial Officer)
Can you start with the top line?
Stefan Widing, President & CEO
Yeah, let's start with the development on the top line. And maybe just also to give one data point that could be relevant for you going forward because I know you're all trying to estimate the split between cutting tools and powder. What we can say is that in the quarter, the powder business was 19% of machining from an invoicing point of view. So just to give that as a data point. Then if we look at the development of the cutting tool business, up 20%, we are seeing, and what we expect is very difficult for us to see this fully through, of course, but around the 7%-ish pre-buy effect.
Orders and revenues are at the same level in Q2. But if you remember, we had a higher order intake in Q1, but we are in a way still sitting on that backlog even though it's, of course, we have delivered the orders in March, but it has been refilled by new pre-buys. And this is in our view of it that it is expectations of more price increases later in the year, which is a reasonable expectation. So customers are sitting on a little bit higher inventory levels at the moment because of that.
So 20% cutting tools, maybe 7%-ish is a pre-buy effect. Then of course there's a price effect in there. And then what you have left is an underlying market-driven volume of low single digits. You can add maybe a percent or so to that for us because we see we are taking some market shares. Then we also see some longer-term restocking, which is normal in a cyclical upturn, adding to that. So the underlying volume type development is still in the high single digits, you could say.
But some of that, these restocking dynamics, the rest underlying in market share. So there is a volume effect that I think that helps in this if you take it from there.
Cecilia Felt (Chief Financial Officer)
Yeah. And looking at the margin development, then this temporary tungsten pricing effect is the biggest contributor to the year-over-year margin development. But then as I also said, we have material impact also from better profitability in our mind and good fixed cost absorption in the powder business. Then on the cutting tool side, price versus inflation is dilutive on the cutting tools as we're still lagging on the raw material costs in comparison to the price increases that we've done.
But then we get positive leverage on higher volumes. And then we have the restructuring program. But the powder business, both the temporary and the fixed cost absorption, both of those have a sizable impact on the year-over-year development on the margin.
Alex Jones, Bank of America
Okay. And just to clarify, that price cost element is also negative in absolute terms. It's not just margin dilutive because you're raising price a lot and cost is going up the same, but it's actually negative on absolute profit dollars in cutting cost.
Stefan Widing, President & CEO
Yes, yes. And the net effect of the positive absolute effect in powder and cutting tools, that's the 550 together.
Alex Jones, Bank of America
Understood.
Stefan Widing, President & CEO
And the reason we choose to, let's say, provide it like this is because of course the negative effect you have on the cutting tool side, that is actually something we are having as profit in our powder business, since that's where the money ends up. It makes sense if you look at machining as a whole, to look at the net effect of this.
OPERATOR
We now have a question from the line of John Kim from Deutsche Bank. Please go ahead.
John Kim, Deutsche Bank
Hi, good afternoon. Two from my side as well. Staying on the topic of tungsten. If we use the notionals and kind of track that versus what developed in Q1 and Q2, I think it might be fair to say there's a little bit of a disconnect perhaps. Any guidance here on how we should think about modeling powder price ups and the framework agreements as we had in the Q3 and Q4?
Stefan Widing, President & CEO
I mean, I can start and you can see if you want to add something in, it's of course quite a few parameters to take into consideration. First you need to look at the APT price development but you also need to look at the scrap price. Earlier they were fairly similar but actually diverged quite a lot recently. So if you have that as a starting point and then you need to take into consideration that we say that about 55% of the material that we use on average is recycled material and the rest is virgin material, either from our own mine or from other mines outside of China. So that's some of the parameters you need to think about then as Stefan said, powder share of machining total invoicing is around 19% in the quarter.
Which also means then if you do the math, that volumes are down. We also said that in Q1 of this year for the powder business and they are down low double digits, sorry, in tonnage. Yes, thank you. And then of course when you look at these indices and you take a quarter average comparing with another quarter average a year ago and you have very sharp development during the quarter that can also skew the picture. I think there it's important to do a more precise calculation also looking at how it is has the pricing has developed within the quarter. So I think those are a few things that can maybe help when you try to model the impact here.
Cecilia Felt (Chief Financial Officer)
Yeah, I think this with averages I think is a very important point because you almost have to do the calculation on a weekly basis to get even more accurate. And personally I think it's this quarter is basically a bit impossible from an outsider to predict this number because of course it's a lot of, it's basically a mathematical exercise but you don't have all the information. And even for us, if I look at, you know, looking forward a quarter ago, it's very difficult even for us to assess these impacts because when you have things going up several hundred percent over a quarter in a steep curve, the timings becomes very, very important. So that's also why we are trying to guide a little bit more and provide a little bit more data. So going forward because now of course the prices have been quite stable during Q2.
So taking this and the new information you are getting, it should, if the tungsten prices stay where they are, it should be a more easily sort of predictable development going forward and maybe also on the volume taking orders.
Stefan Widing, President & CEO
Yeah, good point. So another thing we want to remind you of is that, that we had very high powder order intake in Q4 and also Q1 and the normal thing in the powder business is that we take frame orders at the beginning of the year for the whole year. And then now it happened also in Q4 because of this dynamics customer wanted to place orders earlier to secure supply. But this also means that now in Q2, for example, we are basically not taking any orders for next year.
We have the orders already. The order effect you're seeing is sort of the revaluation of the order backlog based on increased tungsten prices. So if you are modeling sort of a forward rolling 12 months order intake to sort of always have the next 12 months in the order backlog, then you will also end up wrong. What happens now is the backlog is shortening and then in the fall we will open up the order books for next year. And we have customers wanting to place orders now.
We don't want to take them because it's such an uncertain situation. So we prefer to wait with that and then we'll open up the order books in the fall. And maybe I should say primarily in Q4 as well.
John Kim, Deutsche Bank
Okay, super helpful. I want to pivot to mining for a second. Could you help us unpack the operational leverage in the division in Q2, the incremental year on year? I want to say 20, 30 basis points here. You had some forex headwinds. You mentioned the mine closure in South Africa, but did the drop through margins and the velocity of the equipment delivery meet expectations for. Is there some kind of one off or timing effects we need to be thinking about in the print?
Stefan Widing, President & CEO
Yeah, I mean what we've said for mining is that a normal leverage is around 30%. Now we came in at 25% in this quarter and that is primarily the result of those two one-off items that we mentioned. First a settlement for a litigation and then one of costs related to this diamond mine that was effectively put into restructuring. So it is those two. So this is not a drag that will continue in coming quarters. It was specific to the second quarter.
John Kim, Deutsche Bank
And just a quick follow up if I may, is there any change in the timeline from book to bill or order to revenue recognition right now?
Stefan Widing, President & CEO
No, I would say we're still around this slightly elevated. So maybe 10 to 11 months is where we are sitting with time.
John Kim, Deutsche Bank
Okay, thank you.
OPERATOR
Thank you. The next question comes from the line of Daniela Costa from Goldman Sachs. Please go ahead.
Daniela Costa, Goldman Sachs
Hi, good afternoon. Thank you for taking my question. Sorry to drill back into the tungsten, but just wanted to understand, sort of. You mentioned that you think clients might be expecting more price increases on the tooling going forward. But how do we square that with like tungsten price in Europe seems to have flattened out over the last couple of months and I guess tools sold out of China probably have significantly lower prices now. Why do you think it's possible to put more price increases?
That's the first question. And then just on the mats, I think in the last quarter you have mentioned that you had sort of like a raw material or a cogs lag that could go up to nine months. So just wondering why you had a negative net price impact this quarter if or have you started to use things more on spot just to kind of understand exactly why it was negative and not slightly positive. Given you put prices up at the beginning of the quarter in May.
Stefan Widing, President & CEO
Do you want to start with Chinese competition development?
Cecilia Felt (Chief Financial Officer)
Yeah, on the price going forward here. I mean you know the dynamic. We have a three-month lag announcing price increases and so on. And of course when we announced, if you take the mid-May or the early May price increase we did that was maybe announced in early February. So even if we already a week after that, no, we should have done more. We cannot do price increases every week or every month. So it means there is naturally. So we have to wait a little bit.
And that's why it's fairly obvious also when you look compared to other players that there will be more price increases coming. We don't see that. I mean that should be fairly obvious. In terms of competition from China. I guess you're referring to that tungsten prices are a bit lower in China currently. This is not a dynamic we are seeing really in our segments also with primarily premium tools. We have always faced cost competition. That's nothing new that's been there for ages.
The Chinese players that are exporting are primarily or they are in the mid-market selling through distribution, always competing on price. Nothing new. If you look at what this price differentiation and tungsten between the different regions mean, you apply it to the cogs of the cutting tool. It's something we can manage. We are selling on value, not price. Of course there are also many markets where it's a big resistance to going to Chinese tools as well, which is also putting up a bit of a barrier there.
So we are confident that whatever price we need to put through that will also come through.
Daniela Costa, Goldman Sachs
I think you answered both questions. All right. Anymore.
OPERATOR
We now have a question from the line of Sebastian Kuen from RBC Capital Markets. Please go ahead.
Sebastian Kuen, RBC Capital Markets
Yeah, thank you for taking my question again on tungsten. I don't quite understand when you have a 550 million effect windfall effect in Q2, which is a year-on-year effect, how this effect then drops to 200 million in Q3. I would expect that, you know, if you get these time lags through also for the cutting tools in the next quarters, if anything the windfall gain should rise. Could you maybe explain a little bit why the windfall itself already subsides?
Now that would be my first question.
Stefan Widing, President & CEO
Not sure I quite understood the question.
Sebastian Kuen, RBC Capital Markets
You guys. For 200 million tungsten effect, right? For Q3 net.
Stefan Widing, President & CEO
Yeah. Powder and cutting tools. Yes, yes.
Sebastian Kuen, RBC Capital Markets
Powder and cutting tools. Yeah. Yes. That means the windfall gain is declining again as a what we would consider a temporary effect because we're only trying to estimate or isolate what we think is a temporary margin boost or a temporary margin, a negative impact on the cutting tools. Then when we do cutting tools, price increases that are not. If we come out of a dilutive position, then we don't think that is a temporary boost any longer for the cutting tools, if that makes sense.
Maybe. And then nine months of inventory in cutting tools. Now you have nine months of tungsten inventory for the cutting tool. You have three months for powder, but nine months for cutting tools. I would have thought that the windfall gain, that timing difference remains rather high, but might be wrong.
Stefan Widing, President & CEO
Yeah. Let me try to explain also. I mean first of all on the powder side, I mean you can look at the tungsten prices. They went up, they were creeping up in the fall, but they had a major kind of rise in Q1. So it was during Q1. So it's not so strange that we now have a quarter of this positive timing effect because after that they have leveled up. And with this up to 3 months lag then in the COGS that should start to level out into Q3. Since we are now working with raw material in the powder business that have been bought at these elevated levels as well.
When you come to the cutting tools on the nine month lag, we are of course, I mean this is part of this. With the timing of price increases in cutting tools, in powder is an automatic pricing, which means we get this windfall in cutting tools, we are matching or we're trying to match the best we can, the price increases with the pace at which it flows through our COGS. So when we estimate the price increase we need to do in three months, we are trying to do them at the level of.
So we match the COGS that will flow out at that point in time to have a neutral effect on the margin in cutting tools. And this is of course we want to be fair to our customers and also for competitive reasons, we don't want to sort of overdo this. We're just trying to maintain our margin in cutting tools despite this higher raw material cost. So if you could change prices in real time, there would be no effect. Now we have a three months notification period and so on.
It creates a little bit of dynamic which means right now we are a little bit behind. We will eventually catch up in the fall and then it will be neutral. And then on top of this three months notification time, we also need some internal planning and preparation before that. So our decision point is even earlier than the three months notice period.
Sebastian Kuen, RBC Capital Markets
Understood, thank you. I have another question now for mining aftermarket volume. I mean you saw 17% increase, but I would assume that this also is affected by tungsten pricing. I mean mining is buying the components probably from your powder business in machining. And machining will book all the gains for this. But there's still this inflationary pressure now that you have in the aftermarket in mining, can you maybe give us an indication of how much in this aftermarket growth it's pricing, how much is volume and how much is just the pass through of higher format costs for us to understand what the volume increases?
Stefan Widing, President & CEO
Yeah, I mean you are right of course that on the Rock tools side the drill bits contain tungsten and there are price increases coming through there as well. Rock tools though in the total aftermarket business, Rock tools is sizeable, but it's a definite minority. Parts and services is by far the biggest. Now you have ground support and digital mining in there as well. Well, and also on the rock tools, the tungsten portion of the raw material, it's mainly steel. So the tungsten portion of the raw material means that it's not the same effect as you will have in a cutting tool. And then another effect here is that we are not rock tools, we are not selling through distribution, etc. It's mining contract. It's a little bit more slow moving in pricing as well. We have not sort of broken out that effect in aftermarket.
And I would say in this quarter it's immaterial. It is something maybe to consider going forward, but it's not something I would call out at all this quarter.
Sebastian Kuen, RBC Capital Markets
Understood, thank you very much.
OPERATOR
The next question comes from the line of Max Yates from Morgan Stanley. Please go ahead.
Max Yates, Morgan Stanley
Hi, just two questions from me. Just the first one is just around M and A. And you obviously completed the filtration acquisition. I'm just wondering kind of how broad are you kind of prepared to go as you kind of move out of crushers? You know, you've obviously added filtration and dewatering. You know, there's other areas like, you know, high pressure grinding rolls, slurry pumps. So I'm just curious, you know, when, when you think strategically about your rock processing business, how, how do you think it looks in, in three years time in terms of the, the depth and breadth of your, your product offering?
Stefan Widing, President & CEO
Thank you. It was a good question. I mean, we have been not so specific around this, but what we have said is we want to grow in attractive niches. What we mean by that is product categories where there is a high share of aftermarket service, meaning typically good margins and resilient business. It's also where we think we can add something in terms of competence and so on if we are in the comminution circuit, meaning close to the crushers. You asked about M and A, but there are also other ways of going, going into markets there with organic developments and so on.
So I think we will three years from now be a little bit broader than we are now. I do think we took a big step forward with filtration and we'll probably, let's say consolidate that for a while. I mean, Schenck was three years ago. We know it took a few years to sort of get fully into that part of the market, establish, start to scale it, get synergies. It will take some time also with filtration and dewatering. So I don't want to be more specific than that.
We will definitely try to broaden it a little bit more. But it will be also based on what opportunities arise and what kind of organic investments we are ready to make. But I wouldn't expect, I mean you shouldn't 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, but we will, the direction is clear where we want to go.
Max Yates, Morgan Stanley
Okay. And maybe a quick follow up just on the large order pipeline. So you've obviously had a much better quarter than your competitor or your nearest competitor in terms of large orders. I guess I just wanted to sort of think through. We've seen orders oscillating anywhere between kind of 1 to slightly above 2 billion when we think about, and I'm not going to try and pin you to a quarter, but when we think about sort of the second half, does the pipeline look like that kind of level can be sustained or was this kind of really a quarter where everything came together both in terms of projects being sized but maybe you kind of getting a foot ahead of your competitor in lots of those books.
Stefan Widing, President & CEO
I think major orders above 2 billion in a quarter is fairly rare. That's also why we were quite happy that we matched last year's level again. But I would be stretching myself if I would say that that's some kind of new normal. But I will also say we do see a very active market out there. There's lots of projects, a lot of business to be won. So 2 billion is unusually high, but there is no reason for why it shouldn't be. Major orders also in the upcoming quarters.
Let's put it like that.
Max Yates, Morgan Stanley
Okay, Claire, thank you.
OPERATOR
We now have a question from the line of James Moore from Rochel Redburn. Please go ahead.
James Moore, Rochel Redburn
Yes, hi everybody and thanks for the time. I've got a few on the same topic. Forgive me, but thanks for the powder share. 19%. Any chance you could call out the previous five quarters? I'm assuming 6, 8, 89, 12. But it would be kind of helpful just to see the sequencing. That's the first question. Maybe we go one at a time.
Stefan Widing, President & CEO
We haven't split it out. What we've said is that for 2025 the powder business was high single digit share of machining.
James Moore, Rochel Redburn
So you're just missing Q1 then. How does my 12 sound?
Stefan Widing, President & CEO
Let us come back on that to see if we should provide that. We haven't discussed that. I don't think we thought about that. We will come back to see if that's something we should in that case share in some way that everyone gets the information.
James Moore, Rochel Redburn
Thank you. On the machining margin, 25 excluding the 380 or sustainable is a funny word. I think it still includes a premium powder margin. Would it be possible to say what the increase in the pure cutting tool margin was year on year? I think you said it was down 100bps in the first quarter and now it's up. But is it like enough to get to 25? I assume it isn't up 3,400bps from say 21 to 25. I assume it's something more modest than that. But any scaling on the cutting tool margin would be great.
Stefan Widing, President & CEO
We're not giving really any specifics but I mean cutting tools did improve the margin year over year. But I would say a larger share of the margin improvement comes from the powder business. I think that's as specific as we can be.
James Moore, Rochel Redburn
Okay, thanks. And I see the tungsten prices rolled down a bit but the European ATP price is flat. Is there any way you could help us with what we should use as a regional global basket on ATP next slide.
Stefan Widing, President & CEO
I think you should use the Rotterdam prices because when we are talking about these dynamics in our powder business and so on, China is completely separate also for us it's a completely separate supply chain and so on. So our powder business is the non-Chinese part and that is driven by the Rotterdam prices and also the scrap notations.
James Moore, Rochel Redburn
Really helpful. And just, just lastly on the 550 and the 200, any chance you could get the two Gross Impacts powder versus cutting tool? Because I still don't really understand whether they're made up of two very disparate numbers.
Stefan Widing, President & CEO
Yeah, no, sorry, we don't. We're not giving the split between the two, just the net number I'm afraid.
James Moore, Rochel Redburn
Okay, so it's a net of a bigger powder positive and a negative coupling tool impact in the quarter.
Stefan Widing, President & CEO
Yes, yes, that I said before. That's true.
James Moore, Rochel Redburn
And you couldn't say whether one is bigger than the other in magnitude without sizing it.
Stefan Widing, President & CEO
No, no, sorry, we're not giving more, more specifics than that I'm afraid.
James Moore, Rochel Redburn
It's just a temporary effect anyway. You know it would be in Q3 so.
Stefan Widing, President & CEO
Absolutely. But we've all got to model it so we need to know how big it is. Okay, thanks.
OPERATOR
The next question comes from the line of Vladimir Serkiewski from Barclays. Please go ahead.
Vladimir Serkiewski, Barclays
Yes, hello. Thanks very much for taking my two questions. They will both be on mining. Number one would be on new equipment orders but the base orders and not large order. If I try to estimate those, I end up with those base new equipment orders declining sequentially, potentially quite materially. This is obviously very high level in Q1. So question is, was it really the case that they declined sequentially and if that was the case, what was the reason for that?
Stefan Widing, President & CEO
Yeah, I think it is a little bit of a dynamic where probably in Q1 there were some customers placing more orders to secure the supply during the year and now it's more normalized. I don't have a specific number on that or anything like that. It's a fairly normal seasonal pattern that we have a more positive book to build in Q1. So maybe it was more. I haven't looked at that actually sequentially versus prior years. Maybe it was a little bit more emphasized this year, I don't know.
But that is fairly normal pattern.
John Kim, Deutsche Bank
Understood. That's super helpful. And then I wanted to come back to the 17 aftermarket growth. I know, Stephanie, you explained the drivers behind that, but in any case, it's an exceptional number within any historical context. Was there any material pricing contribution to the 17%? And then if it wasn't a material pricing contribution, how surprised you were yourself to see this?
Stefan Widing, President & CEO
No, there is no material pricing in that. It's, it's normal pricing, I would say. So nothing that is sort of an extra material driver. How surprised were we? Well, a little bit, let's put it like that. And we, we, we are always impressed, especially when portion services come in with these gross numbers because they have been growing for a long time now at very high levels. So we understand, we can see the underlying drivers. But of course, you're always happy to see things coming in a little bit on the upside.
Luis Cheddar, Head of Investor Relations
All right, we need to wrap up. It's actually a busy reporting day today, so it was pleasing to see that we went full hour. If you have any further questions, please don't hesitate to call IR. And we thank you for calling in and wish you a great summer.
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