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Interim report Q1 2020 April 23, 2020 Helena Hedblom, President and CEO Anders Lindén, CFO
Interim report
Q1 2020
April 23, 2020
Helena Hedblom, President and CEO
Anders Lindén, CFO
Direction forward
Innovation Aftermarket Operational excellence
2
Sustainability
• Impact on operations
• High customer activity
– Continued growth in service
– Stable equipment demand, sequentially
– Order intake somewhat higher than in Q4
• Lower revenues
– Negative impact from Covid-19
• Improved underlying margin
• New members of Group Management and a
more efficient working structure
• Challenging Q2
• Efficiency actions initiated
Key highlights Q1 2020
3
Limited effect on Q1 results from Covid-19
1 515 1 810 1 898 2 162 1 930 2 263 1 927 2 016 1 932
18.4 18.4 19.7 20.5 19.7 21.319.0 19.6 21.2
19.6 20.2 21.0 20.4 20.3 21.7 21.3 20.7 20.9
0
10
20
30
40
50
0
2 000
4 000
6 000
8 000
10 000
12 000
Q1 2020Q1 2019Q1 2018
9 651
Q2 2018 Q3 2018 Q3 2019
10 158
Q4 2018 Q2 2019
9 843
Q4 2019
8 233
10 5589 785
10 626 10 2809 134
Operating margin, %
Revenues, MSEK Adj. Operating margin, %
Operating Profit, MSEK
• Order intake declined 3%, -4% organic
• Revenues declined 7%, -8% organic
• Operating profit at MSEK 1 932
– Items affecting comparability of MSEK +21 (costs
related to efficiency improvement -44 and LTI +65)
– Positive contribution from currency
• Margin improved to 21.2% (19.7)
– Adjusted margin 20.9% (20.3)
– Margin supported by currency, but diluted by lower
revenues
• Operating cash flow at MSEK 1 532 (472)
• Board proposes to the AGM to decide only on
the first installment of the dividend of SEK 1.20
per share4
Key financials Q1 2020
10 000
0
9 800
10 200
-4%
Q1 2019 Organic
0%
Currency Structure & Other Q1 2020
9 772
+1%
10 063
-3%
Orders received, MSEK and change, %
Revenues, operating profit and margin
Covid-19
Impact Equipment
• Operational, but with negative impact on
supply of components
• Equipment manufacturing closed in India
and Italy
• Challenges with commissioning
Current status
Impact Aftermarket
• Our sales, service and distribution in the field
are operational in most places, with restrictions
• Consumables manufacturing closed in India,
South Africa and Canada
• Some mines have temporarily stopped or
reduced activity
• Construction customers also impacted
5
Actions with short-term impact
• Reduce additional workforce and consultants
• Work-time reductions and temporary layoffs
• Reduce expenses
Actions with long-term impact
• Efficiency initiatives with expected annual savings of
more than MSEK 500
• Consolidation of manufacturing
• Supply chain program
Q1 2020
Efficiency improvements
6
• Solid development in service
– Service products
• Rock drilling tools affected by optimization of the
product offering
Q1 2020
7
Increased resilience through the aftermarket
19 89519 113
21 348
23 822
26 829 26 987
0
5 000
10 000
15 000
20 000
25 000
30 000
2015 2016 2017 2018 2019 March 2020
+6%
28%
45%
27%
Revenues in the quarter
Equipment Service Tools & Attachments
72%
Aftermarket
(66)
Aftermarket revenues, MSEK
12 months figures.
• Epiroc, in partnership with automation specialist
ASI Mining, to convert Roy Hill’s haul trucks to
autonomous use
• HATCON – remote monitoring for hydraulic
attachments using MyEpiroc platform
• Epsilon premium tricone bits
• DM30 II SP – Rotary blasthole drill
Q1 2020
Leading the way in innovation
DM30 II SP – Rotary blasthole drill
8
New long-term sustainability goals
• Halve CO2 emissions
– From operations
– From transport
– From our equipment
• Health and safety
– No work-related injuries
• Code of Conduct
2030 goals
• Diversity and inclusion
– Double the number of women
in operational roles
9
Financials
Profit impacted by items affecting comparability
Q1 2020Operating profit and margin
11
* Q1 2018-Q4 2018 includes costs related to the split from Atlas Copco.
* Q1 2018-Q4 2019 includes change in provision for long-term incentive plans.
* Q1 2020 includes items affecting comparability of MSEK +21. Costs of efficiency actions of MSEK -44 and change in provision for long-term incentive plans of MSEK +65.
1 5151 810 1 898
2 1621 930
2 2631 927 2 016 1 932
181233
18.4 18.4
19.720.5
19.7
21.3
19.019.6
21.219.6
20.221.0
20.4 20.3
21.7 21.320.7 20.9
-3
0
3
6
9
12
15
18
21
24
3 000
0
500
1 500
4 000
1 000
2 500
3 500
2 000
-8
Q1 2018 Q2 2018
126
-21
Q3 2018 Q4 2018
95
Q1 2019
39 2 160
Q2 2019 Q3 2019
115
Q4 2019 Q1 2020
1 610
1 991 2 0242 154
1 989
2 302
2 131
1 91159
Operating margin, % Operating profit, MSEKItems affecting comparability*, MSEK Operating margin, adj., %*
Epiroc Group – Profit bridge
Looking into the numbers
12
44 65
0
1 600
1 800
2 000
1 911
OrganicQ1 2019
+91
+1.1 pp
Structure and other
+133
+1.3 pp
-222
-0.9 pp
1 930 1 932
LTI Adjusted operarting profitCurrency Q1 2020 Items affecting
comparability, excl. LTI
-1%
“Structure and other” includes operating profit/loss from acquisitions and divestments MSEK +1, costs of MSEK -44 related to efficiency improvements, split costs of MSEK +10 = -7-(-17), and change in provision for long-term incentive
programs MSEK +124 = +65-(-59). “Items affecting comparability” includes change in provision for long-term incentive programs MSEK +65 and costs of MSEK -44 related to efficiency improvements.
Margin: 19.7% Margin: 21.2% Adj. margin: 20.9%
• Orders received -3% organic
• Service orders +12% organic
– High customer activity
• Equipment orders -17% organic
– Investment decisions postponed
• Revenues -8% organic
• Operating profit at MSEK 1 595, including costs
related to efficiency improvements of MSEK -34
• Margin at 24.2% (24.2)
– Supported by currency and mix
– Negatively impacted by lower revenue volumes and
costs related to efficiency improvements
– Adjusted margin 24.8%
Q1 2020
13
Segment: Equipment & Service
0
7 100
7 300
7 200
7 400
Q1 2019 Structure & OtherCurrencyOrganic
7 248
7 101+1% 0%
-3%
Q1 2020
-2%
Orders received, MSEK and change, %
7 4427 947
7 190 7 116 7 2487 677
6 874 6 7107 101
5 943
7 325 7 178 8 094
7 1157 702 7 334 7 740
0
5
10
15
20
25
30
35
40
0
2 000
4 000
6 000
8 000
10 000
24.2
Q4 2018Q2 2018
22.9
Q1 2018
23.9 23.224.6 23.9
Q3 2018 Q1 2019
25.6
Q2 2019
26.3
Q3 2019 Q4 2019 Q1 2020
24.2
6 579
Order intake, MSEKOperating margin, % Revenues, MSEK
Orders received, revenues and operating margin
14
Equipment & Service – Profit bridge
34
1 800
0
1 600
1 400
1 500
1 700
Currency Structure
and other
Q1 2020 Items affecting
comparability
Adjusted
operating profit
OrganicQ1 2019
-33
-0.5 pp
1 719
1 5951 629-185
-0.8 pp +94
+1.3 pp
-5%
Margin: 24.2% Margin: 24.2%
Looking into the numbers
Adj. margin: 24.8%
• Orders received -7% organic
– Negative for both rock drilling tools and orders for
hydraulic attachment tools
• Revenues -5% organic
• Reported margin of 13.5% (14.2)
– Costs related to efficiency improvements MSEK 10
– Adjusted margin 13.9%, supported by currency, but
negative impact of the lower volumes
• Consolidation of production in Canada
Q1 2020
15
Segment: Tools & Attachments
2 600
2 700
2 900
2 800
0Structure & Other
2 760
Q1 2019 Organic Q1 2020Currency
+2
2 6190%
-7%
-5%
2 550 2 4702 285 2 306
2 7602 826
2 6652 517
2 619
2 245
2 452 2 3822 440
2 605
2 9262 765
2 503
0
5
10
15
20
25
30
35
0
500
1 000
1 500
2 000
2 500
3 000
3 500
13.6 13.3
13.9
12.4 11.812.8 13.6
Q2 2018
12.8
Q1 2018
12.4
Q3 2018
13.3
Q4 2018
2 505
14.214.2
12.2
Q1 2019
14.614.6
Q2 2019 Q4 2019
5.7
Q3 2019
12.5
Q1 2020
13.5
Adj. operating margin, % Revenues, MSEKOrder intake, MSEK Operating margin, %
Orders received, revenues and operating margin
Orders received, MSEK and change, %
16
Tools & Attachments – Profit bridge
Looking into the numbers
390
240
270
360
300
330
0
60
371
Currency
-11
-0.4 pp10
Q1 2020 Adjusted
operating profit
Structure
and other
+46
+1.7 pp
Items affecting
comparability
347
Q1 2019
-69
-2.1 pp
Organic
337
-6%
Margin: 14.2% Margin: 13.5% Adj. margin: 13.9%
• Lower comparable costs
– Expenses adjusted for change in provision for
LTI and items affecting comparability
• Net financial items MSEK -46 (-100)
– Interest net MSEK -33 (-39)
• Tax expense MSEK -464 (-456)
– Effective tax rate 24.6% (24.9)
– Guidance: below 25%
Q1 2020
Administration, marketing and R&D expenses
17
Costs, net financials and tax
1 386
1 5691 482
1 637 1 6631 745
1 671 1 7081 640
16.815.9 15.4 15.5
17.0 16.4 16.5 16.618.0
0
5
10
15
20
25
30
0
500
1 000
1 500
2 000
Q3 2019Q2 2019Q3 2018Q1 2018 Q4 2018Q2 2018 Q1 2019 Q4 2019 Q1 2020
Expenses in % of revenues
A, M and R&D expenses, adj. for change in LTI provisions and restructuring, MSEK
Q1 2020
• Net cash position of MSEK 1 191
– Previous year net debt of MSEK 3 641
• Net debt/EBITDA ratio at -0.12 (0.39)
• Strong financial position
– Long-term financing in place
o First maturity in 2022
– Revolving credit facility (RCF) of MSEK 4 000
maturity extended to 2025
• Board proposes to the AGM to decide only
on the first installment of the dividend of
SEK 1.20 per share
18
Capital structure
Net debt and Net debt/EBITDA
1 9822 125
2 012
483
-1 191
0.390.43
0.24
-0.12
-0.4
-0.3
-0.2
-0.1
0.0
0.1
0.2
0.3
0.4
0.5
0.6
-2 000
-1 500
-1 000
-500
0
500
1 000
1 500
2 000
2 500
3 000
Q1 2019 Q2 2019 Q3 2019
0.05
Q4 2019 Q1 2020
Net debt/EBITDA ratio
Net cash (-) / net debt (+), end of period, MSEK
Q1 2020
• Net working capital decreased 6%
– Reduction in both trade receivables and inventories
– Trade payables also lower, which partly offset the
improvement year-on-year
• ROCE at 26.2% (31.0)
– Impacted by cash, acquisitions and IFRS 16
19
Capital efficiency
Capital employed and ROCE
Net working capital
12 15814 062 14 174 13 457
31.834.4 35.3
32.635.3
0
10
20
30
40
0
5 000
10 000
15 000
20 000
Q1 20202018 Q1 20192019 Q1 2020
14 348
Avg. NWC/revenues, % Avg.NWC, MSEK End of period, NWC, MSEK
23 08629 518 31 092 29 720
33 801
32.0
27.6 26.2
31.0
26.2
0
10
20
30
40
0
10 000
20 000
30 000
40 000
50 000
60 000
70 000
2018 2019 Q1 2020Q1 2020 Q1 2019
ROCE, 12m, % End of period, capital employed, MSEKAvg. capital employed, MSEK
MSEK Q1 2020 Q1 2019
Operating profit 1 932 1 930
Depreciation, amortization and impairment 440 472
Capital gain/loss and other non-cash items 110 - 84
2 482 2 318
Net financial items received/paid 263 - 157
Taxes paid - 385 - 651
Change in working capital -519 -720
Investments, incl. rental equipment* - 279 - 441
Pension funding and other** - 30 123
Operating cash flow 1 532 472
Acquisitions and divestments - 15 - 449
Operating cash flow
Q1 2020
20* Investments include rental investments, net, other PPE, net, and intangible assets, net.
** Other includes adjustments for currency hedges of loans and proceeds to/from other financial assets,
adjusted for divestment of Payment Solutions credit portfolios.
666
199
777
2 242
472
1 506
1 883
2 827
1 532
1 081
1 3211 412
1 623
1 374
1 680
1 341
1 5111 422
0
500
1 000
1 500
2 000
2 500
3 000
Q4 2019Q1 2019Q4 2018Q3 2018Q1 2018 Q2 2019Q2 2018 Q3 2019 Q1 2020
Operating cash flow, MSEK Net proft, MSEK
Operating cash flow and Net profit
Summary and
outlook
• Impact on operations
• High customer activity
– Continued growth in service
– Stable equipment demand, sequentially
– Order intake somewhat higher than in Q4
• Lower revenues
– Negative impact from Covid-19
• Improved underlying margin
• New members of Group Management and a
more efficient working structure
• Challenging Q2
• Efficiency actions initiated
Key highlights Q1 2020
22
Limited effect on Q1 results from Covid-19
Q2 comment
“We expect that the demand
both for equipment and in the aftermarket will be lower
and that the effects of the pandemic will have a significant
negative impact on revenues and profit in Q2.”
Q&A
United. Inspired.Performance unites us, innovation inspires us,
and commitment drives us to keep moving forward.
Count on Epiroc to deliver the solutions you need
to succeed today and the technology to lead tomorrow.
epiroc.com
Disclaimer - Some statements in this presentation, or in conclusion to it, are forward-looking and the actual outcome may be different. In addition to the factors explicitly commented upon, the actual
outcome may be affected by other factors such as macroeconomic conditions, movements in foreign exchange- and interest-rates, political risks, competitor behavior, supply- and IT-disturbances.
