Robit announced its Q3 results today, and to discuss this, I have the company's CEO Mikko Kuusilehto with me in the interview. Hello Mikko! Hi there! Let's go through the past quarter in our traditional way. How would you sum up Q3 as a whole?

Well, I think Q3 was still a good continuation for us in terms of the company's development, continuing the same strong trend that we've had going on all year. We made progress in these new projects that were announced earlier. We were able to deliver, we got to see the products work, we got to ramp that up, and of course, the same kind of work has been done. A lot of work has been done behind the scenes to also find new initiatives and the additional revenue growth that is naturally needed in the future as well.

Exactly. And indeed, revenue and orders were in good growth here, and you mentioned those new framework agreements that we were able to talk about in the spring, so how much impact did these have on those figures, or was there something else behind them?

Of course. So they definitely had an impact, when we look at the big picture of how our quarter went, it is of course visible that the share of project business was frustratingly small. And then the compensation for that happened precisely through these new agreements, as their invoicing and deliveries rolled relatively well in the background, and we got into a rhythm there, so it has undoubtedly had a visible impact on our figures.

How have these agreements, how has this ramp-up progressed, and are we currently starting to reach full cruising altitude?

We are not yet at full cruising altitude in any of these situations. Naturally, there is always, and it might be that we discussed this the last time we sat down, that there is always a certain variable in the timeframe when it happens, that switch from the previous supplier to the new one. And the timing of this is, of course, something that is quite difficult to predict too much in advance. So we still see that we are heading in the exact right direction. Not everything has started with full force yet, but despite that, we have been able to advance each of these. Nevertheless, during this quarter.

Exactly. Indeed, in Top Hammer and Down the Hole. Well, that development was positive, but as you said, on the project side in geotechnics there were challenges, or not challenges, but the market situation was challenging. So what was the factor there that had changed, because earlier in the year one remembers that this was where the growth came from?

We were. We were. We succeeded tremendously well. During the first quarter in this project business. And it is. You could see it back then in our figures too, when looking at it at the time, that it was sort of the momentum that gave us that big growth in the beginning.

Maybe one could say that perhaps nothing has really changed in the market as such. The competition is very, very, very fierce right now in those big projects. I think, and I would assume, that we are also in an exceptional situation market-wise in that there are currently a relatively large number of very large projects. Large projects inevitably attract competition. And now, of course, there is a lot of talk about data centers and other projects, which naturally show up, have shown up, and are currently on the table. And it is indeed so that we are not the only ones who want those deals, and through that, the competition in it is fierce, meaning sometimes you win, not always.

Really? Have new competitors entered the market? What? Or is it? Is it more related to whether the number of projects has decreased or not?

No, not really. I would say neither. That we operate in the market with the same competitors as at the beginning of the year. There have been large projects on offer during the spring and now at the beginning of autumn as well. And some we got and some we didn't get from there. And now what has happened is that at the beginning of the year we managed to win very large projects. Now we weren't able to win those few significant, truly massive projects. You can definitely see in that, in a way, that the general competitive environment has inevitably evolved along with it.

Yes, indeed. So basically, however, the Nordic countries are your most important market, looking ahead to next year the situation is nevertheless reasonably good.

Yes, and indeed. Yes. Yes. When you follow the news, when you follow the discussion in general regarding Finland or when you look at it on a broader scale, what discussion is now expected, for instance, about data centers or in general. What is happening on the infra side in general construction, I still think that the market situation is such that one can comment on it as being favorable for an operator like us. There is certainly business to be taken in that market.

Yes, indeed. Perhaps then, if we look even more generally at the market situation. If we look at the mining side and then the construction industry, what is that situation like at the moment? Well, on the mining side the situation is naturally quite good, since metal prices are high. But perhaps the construction industry is more interesting, that you nevertheless expect demand to develop positively. But at the same time, on the geotechnical side there is a tighter market situation at least regarding competition, so how should this be interpreted?

Well, if we go back in history about whether there are markets where we operate. If we talk about the Nordic countries for example, have there been truly massive scale projects in the Nordic market? If foundation piling has been done, it has hardly been on the scale that is seen currently when you look at the scale of an individual project. Now these projects that we have bid on, that we have delivered, are very, very exceptional in scale. And when you look ahead from this at what will happen in the Finnish market, for example. What kind of information has come from the market regarding where data centers will be built in this situation, the indication is indeed that those projects are still coming, and they are large projects. When looking at the total revenue of our geo business generated on an annual basis, and looking at the size of a large project within it, they are truly significant for us, and the volatility in the figures is then immediately quite significant when it hits.

Yes, indeed. Perhaps related to that, if an improvement is expected, moving slightly into next year already, this year was reviewed, so the beginning of the year was very strong, does this mean that as the market picks up, with successful operations the figures can be even higher. Then in 2027.

Well, I mean, whenever you are in a competitive situation, you cannot win everything. And every now and then there are naturally those projects that you would like to get, that you cannot get. But I think the market still offers us opportunities to improve in the situation where we currently are. But it is the sum of many parts whether Robit is chosen as the supplier for these specific projects.

Yes, indeed. Perhaps then if we go back to earnings and talk specifically about earnings, revenue grew, earnings decreased. What were the most important explanatory factors there?

Well, we certainly took quite a hit from exchange rates. That's pretty clear. And then the second thing, of course, that shows in our earnings to some extent is that the spike in the price of tungsten that occurred during the spring, which has now shown up in the products we delivered, has naturally had an effect on it as well. But we certainly took quite a blow from that. From that exchange rate this quarter, it seems to be something in our business, in our world, that causes volatility for us sometimes more, sometimes less. Now we hit a situation where there was quite a swing, and then it also stems from some massive change in the Korean won, which is immediately visible in our earnings, meaning we are quite fragile with currencies nonetheless. That lives with our earnings development. When the overall earnings are relatively small in absolute terms anyway.

Exactly. So we are talking about large figures for you. I think that has been seen.

Exactly.

Right. And then when, if I am not mistaken, these are, however, these accounts receivable and accounts payable from different foreign exchange rates. Right.

But perhaps one can still comment on this much, that overall, even still, when we look at what we are doing, where we are, and what our operations look like going forward, the foundational operations nonetheless remain at a good level in the background. It certainly gives us the belief that what happened now, happened and is gone, and then we move forward. Still, we look ahead with a positive mindset.

Maybe then regarding the price of tungsten and how it has been successfully transferred into your own pricing. And on the other hand, what the outlook is, as you indeed mentioned in the earnings report that you have successfully passed on this increased price to your own. To your own pricing. But what does the situation look like going forward? And on the other hand, can we then assume that now that we have recovered a bit from that price spike, the raw material margin would start heading up again? In the coming quarters.

Yes, well that is how it. That is how we assume it will turn out. And of course this is the starting point too, that this is how it will happen. Naturally, to sort of return to this price change of tungsten, which has indeed been a very significant factor during these past 12 months. In this business, we started from such a significantly low level compared to where we are now. So naturally the impacts of that have been significant for us as well in terms of the big picture, but perhaps right now we are in a kind of situation. It has at least stabilized to some level. Up until now, however, we have lived even within a quarter in such a way that the price fluctuation changes in tungsten have been very, very significant.

So when it stabilizes, it also means that the same cost level will gradually come to all market participants, which then also smooths out that imbalance that has been discussed earlier in this situation, that it brings a certain imbalance to pricing and to the fluctuations that happen market by market and actor by actor when we are in bidding situations. So I myself believe that regardless of what level it stabilizes at, whether a low or a high level, as long as it is some kind of steady price formation, price development for that tungsten, through that it will also then be reflected positively in the long run in the margin development as well.

Exactly. Maybe we can take a sort of status update on how it is then on the competitors' side. How have you observed, have there been any changes? In passing on this tungsten price into sales prices, or is it still the Wild West?

It is there. There is all kinds of activity, and of course it kind of. The customers tell us one type of story, which you can believe or choose not to believe. And then of course what information we get from the market ourselves is a different kind of news about it. But. Overall, the situation is nevertheless that if and when in this industry of ours tungsten is currently a significant overall cost impact on the price of the product. Then it is clear that everyone has to take it into account in pricing in some way. In the long run, you can suffer for a short time somehow, but in the long run something just has to be done about it.

Yeah, yeah. Maybe from this we can then jump to cash flow and working capital. What the price of tungsten, along with those inventory levels required by the new framework agreements, has eaten away quite a bit during this year. So, uh, what is that outlook now, let's say for Q4, is that starting to be behind us in terms of working capital or its tie-up? Or does it still look like working capital is rolling in a negative direction?

No, absolutely. I mean the situation is unsustainable if we do not turn that situation around. That is first of all quite clear, of course. And it is also clear that in order to. In order to when we are in a situation where we have seen that maximum peak in the price of tungsten and its impact. And we have also now been able to deliver these framework agreements, through that it will naturally be reflected as a positive cash flow development. But I do have to say that this, we cannot in any way be, or we cannot in any way be satisfied with what the cash flow hit to us has been. Even though we of course were aware of the impact of tungsten on it and the impact of many other things on it. But. Perhaps this is something where the next time prices peak high and new contracts come along, maybe our tactical moves will also need to be somewhat different in a way. Yeah, yeah.

Maybe then it still comes to mind here, how big a part of the inventory growth has been tied to this tungsten price? And how much then again have these new framework agreements required increasing inventory levels?

Yes, here it is. Well, if I start telling every single detail figure or even remember them. But of course, the fact is that the impact of the tungsten price increase or price rise has been significant, since it naturally is not just in raw materials for us, but it is also reflected in the prices of end products, and rolls forward from there. Of course, that has certainly had an impact, but it goes without saying that when you see that kind of arrival of new contracts, which means, and which are geographically far from our factories, it naturally inevitably ties up capital in the initial phase until we get ramped up.

Yeah, yeah, exactly. Well then, as the final theme, you have told us during the autumn about the organizational reorganization and the global change program, so would you like to open up the background to these a bit? What are these changes aiming for and why have they been made?

Yes, this has of course been a change project that I have been driving through here. Pretty much from the moment I started as the CEO of Robit. Fundamentally, when you look at our own operations and get to know them, you find that we have a certain structure and setup that is necessary if a company is clearly of a larger scale. But then in the end, however, we are quite a medium-small company in size, which means that certain structures and certain functions do not necessarily need to be maintained on the scale we have had up to now, and through that of course we have brought that cost-efficiency to our operations and processes. And naturally these changes that have been made have partly been reflected then in such change negotiations on the Finnish side, but it has equally been reflected then in recruitment and resource changes in other markets in a different way.

Yeah, yeah. So long-term competitiveness.

That is what is being sought here without a doubt, so that our company structure and operating model would be one that matches our needs and the future needs that we have ahead of us.

Exactly. Good. Thank you very much Mikko for the interview and good luck with the rest of the year!

Thank you.