This article first appeared on GuruFocus .
Release Date: July 29, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Strong order growth of 8% year-on-year on a constant currency basis, driven by a 10% increase in original equipment orders and an 8% rise in aftermarket orders.
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Successful market share gains in pumps, winning over two-thirds of new large pump tenders and over 90% of competitive mill pump trials.
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Launch of innovative new products like the MCR2 mill circuit pump and Optimil Vertical Stirred Mill, which enhance efficiency and are protected by patents.
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ESCO division delivered a strong performance with 10% order growth, 11% revenue growth, and a 120 basis point improvement in operating margins to 21.5%.
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Micromine software acquisition is on track to deliver over 25% growth in annual recurring revenue, supported by a 300% increase in the qualified pipeline from cross-selling.
Negative Points
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Operating margins decreased by 100 basis points to 18.8% due to mix effects and production transfer delays in the minerals division.
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Revenue growth was partially offset by delivery deferrals caused by complex production transfers within the Performance Excellence program.
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Free operating cash conversion was low at 41%, impacted by increased working capital for order book delivery and share purchases for LTIP awards.
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Net debt to EBITDA rose to 2.2 times due to cash flow phasing and acquisition-related spending, though expected to normalize by year-end.
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Minerals division experienced a 5% decline in operating profit and a 170 basis point margin reduction due to unusual demand patterns and production inefficiencies.
Q & A Highlights
Q: Can you provide a detailed margin bridge for H2 2026, considering the H1 headwinds from mix, production transfers, and Performance Excellence savings? A(Brian Puffer, CFO): In H1, Performance Excellence contributed a 100 bps tailwind, offset by a 130 bps headwind from unexpected aftermarket mix and early-cycle OE pricing, and a 70 bps headwind from production transfer delays. In H2, we expect the aftermarket mix to reverse, Performance Excellence savings to increase to 120 bps, and the production transfer costs to end. This supports our full-year guidance for margins sustainably above 20%.
Q: How should we think about the group's margin trajectory given the strong OE growth and the start of the CapEx cycle? Is the target still 20-22%? A(John, Outgoing CEO): The setup is to achieve a 20% floor as the gold standard for a high-quality compounder. We do not want to be on a conveyor belt of ever-expanding margins, as the next phase is about accelerating growth and returns on capital. While margins may be higher in some years with positive mix, 20% is the floor, and we will not sacrifice growth investments for short-term margin expansion.
Q: You, FLS, and MADS are all claiming market share gains in pumps. Who is losing share, and are you focusing on a different value portion of the portfolio? A(John, Outgoing CEO): We are the only ones putting numbers out there, backed by our 70% win rate on OE tenders and 90%+ on pump trials. Our razor-blade model focuses on heavy-duty mill circuit pumps with high aftermarket potential ($0.30 on the dollar). We are disciplined and do not chase low-margin, light-duty pumps. Our European peers may be taking share from Chinese or local replicators, but it is not coming from us.
Q: What is the timeline for upcoming FIDs, especially in copper in the Americas? Are permitting processes speeding up? A(John, Outgoing CEO): We are seeing good progress. In North America, political support for critical minerals has led to initial pump packages for smaller projects in H1. In Latin America, changing governments in Chile and Peru are creating a more pro-copper environment. Activity levels with EPCMs are high, and while timing is difficult to predict, we expect larger project starts to come through over the next 12-24 months.
Q: What is the magnitude and phasing of the opportunity from the direct-to-market model for ESCO in Chile following the JV buyout? A(John, Outgoing CEO): The opportunity is significant. Our market share in Chile is about a third of what it is in Peru or North America (50%+). The focus in H1 was on transitioning customer relationships, which is now complete. We are now leveraging the Minerals footprint to go after market share. This also provides a margin tailwind by cutting out the third-party distributor and gives us direct control of a low-cost foundry.
Q: Can you elaborate on the working capital outflow in H1 and the outlook for cash conversion? A(Brian Puffer, CFO): The 41% cash conversion was impacted by three factors: 1) Purchasing LTIP shares in H1 (5% impact), which will not repeat. 2) Building inventory to support the strong order book (book-to-bill of 1.12) for H2 delivery. 3) About 30-40 customer payments slipped from June into early July (8% impact). All these effects are expected to reverse in H2, supporting our 90-100% full-year cash conversion guidance.
Q: What is the aftermarket opportunity for the new Optimill Vertical Stirred Mill (VSM)? Is it in line with the typical 30% ratio? A(John, Outgoing CEO): Yes, the VSM is bang in line with the division's average aftermarket ratio. For every dollar of OE sold, we expect approximately $0.30 of annual aftermarket revenue once commissioned. This is not as high as our best mill circuit pumps but is consistent with our overall razor-blade model.
Q: What does the M&A pipeline look like going forward? Is there a need for more product or geographic acquisitions, particularly in North America? A(John, Outgoing CEO): The focus in 2026 is on delevering to create balance sheet headroom. We are actively refilling the pipeline across all three buckets: technology/software bolt-ons, product infills, and geographic infills. In North America, the Townley acquisition gave us the foundry capacity we needed. While smaller bolt-ons are possible, we are not specifically targeting more there. The focus is global, on opportunities that can deliver compounding returns.
Q: You highlighted strength in oil sands. Is this a sustainable uptick, and what is the outlook for coal? A(John, Outgoing CEO): Oil sands have been flat rather than a headwind. With current high oil prices and US re-industrialization, we are seeing strong aftermarket orders and some brownfield efficiency projects. It will remain a solid, attractive aftermarket business. Coal is now a very small, single-digit percentage of revenue. We will continue to serve those customers but do not see it as a growth driver.
Q: You previously highlighted a target of 50 bps margin expansion. Is the new "sustainably above 20%" target a deliberate change? A(Brian Puffer, CFO): It is not a change. We are committed to industry-leading margins and being sustainably above 20%. With the moving parts of the CapEx cycle, we are comfortable with the operating profit in published guidance. The message is that we are very happy with our position and are driving for industry-leading margins, not getting caught up in the last 10-20 bps.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
