Sandvik: Record Quarter Masks a Temporary Tungsten Windfall and a Strategic Pivot
Robust orders and margins conceal a one-time tungsten boost, while the Diemme Filtration acquisition charts a new course in mining niches.
SAND.ST · Earnings Call · 2026-07-17
A Quarter of Records
Sandvik delivered a standout second quarter, with total order intake up 17% organically and revenues up 23%, to record levels. Adjusted EBITA rose to SEK 8.3 billion, yielding a margin of 22.6% — up from 19% a year earlier and above its target range. “It was a very strong quarter with record revenues and profits.” — Stefan Widing, Chief Executive Officer (CEO) · 2026-07-17 The strength was broad-based: mining order intake surpassed SEK 20 billion for the first time, machining grew 29% with cutting tools up 20%, and intelligent manufacturing posted high single-digit growth. What made the quarter truly stand out, however, was not just the scale of the beat but the unusual composition of the margin, driven by a temporary tungsten pricing tailwind and a strategic acquisition that marks a new chapter.
The Tungsten Tailwind
The most significant driver of the margin surprise was the now-familiar tungsten price dynamic. CEO Stefan Widing explained that machining benefited from a temporary effect of SEK 550 million, worth 380 basis points of margin, as powder sales at market prices outpaced the cheaper raw material cost.
You know that we have a temporary effect from the increased powder prices, which means that we are selling at market prices, and we bought the raw material at a cheaper price.
CFO Cecilia Felton confirmed the magnitude: "As Stefan mentioned, we also have this timing effect from the tungsten price development, SEK 550 million in the quarter. At group level, that corresponds to an in-quarter effect on the margin of 150 basis points." The company was quick to guide that this effect will normalize — they expect only SEK 0.2 billion in Q3 — and the underlying margin in machining, ex the timing benefit, is around 25%. This is not a new theme; tungsten dynamics have been a recurring topic in prior calls, with management discussing the 9-month lag in cost pass-through. Yet the willingness to quantify the effect and the forward guidance marks a shift toward greater transparency, even as the windfall itself fades.
A Strategic Pivot into Filtration
Beyond the quarterly numbers, the quarter's defining move was the acquisition of Diemme Filtration, an Italian filter press manufacturer. “This is a very attractive business. Besides the structural growth in mining, filtration is growing even faster.” — Stefan Widing, Chief Executive Officer (CEO) · 2026-07-17 The acquisition, expected to generate SEK 1.1 billion in revenue this year, creates a new filtration division within rock processing and expands Sandvik's downstream mining offering. This aligns with the company's stated strategy to grow in attractive high-aftermarket niches, as Stefan noted: "We have said for a number of years that we have a strategy to grow in attractive niches in Downstream's mining." The move builds on prior acquisitions like Schenck and diversifies the portfolio into a segment growing around 15% annually, driven by regulatory pressure on tailings dams. It is a clear Diemme Filtration — and more broadly, a deliberate shift into higher-margin, aftermarket-heavy businesses.
Aftermarket Strength and Broader Signals
The aftermarket engine remains a source of confidence. Mining aftermarket order intake grew 17% organically, with parts, services, and automation solutions leading the way. In the Q&A, Stefan attributed the strength to an expanding, aging fleet and higher machine complexity: "The primary drivers are parts and services and digital technologies." This is consistent with prior quarters — in Q2 2025, he had noted, "It is volume-driven." The durability of this growth, despite a slight normalization toward high single digits expected over time, underscores the resilience of Sandvik's installed base. Meanwhile, the company's broader market commentary points to a recovery in infrastructure and improved sentiment in general industry, even as light vehicles remain softer. The order backlog continues to build, supporting revenue conversion in coming quarters.
With the temporary tungsten benefit set to unwind, the focus shifts to the underlying strength of the franchise and the strategic expansion into filtration. Sandvik is not just riding a commodity cycle; it is actively repositioning parts of its portfolio toward structural growers. The quarter's record numbers are impressive, but the durable story is the pivot into niches like attractive niches — where margins are sticky and growth is structural. Investors should watch how the tungsten normalization and the integration of Diemme play out over the next two quarters, as this will test whether the margin expansion is sustainable beyond the windfall.