Interim Report Q4 2019 - Epiroc
Interim reportQ4 2019January 31, 2020Per Lindberg, President and CEOAnders Lindén, CFO
Record revenues and profit in a strong 2019Key highlights full-year 2019 Strong growth of our service business, butnegative development for equipment High interest for automation and informationmanagement, and for battery-electric vehicles Three acquisitions Efficiency actions Financials– Revenues increased 7%– Operating profit 10%– Reported operating margin 19.9%– Adjusted operating margin 21.0% Strong operating cash flow at MSEK 6 688 Proposed dividend of SEK 2.40 (2.10) per shareRevenues and operating margin45 0004540 84940 000 9%4038 28535 0003531 36430 00028 6633027 10225 00020 00015 0 000105 00050201520162017201820190Operating margin, %Revenues, MSEKOperating margin, %, adjusted2
Continued growth in serviceKey highlights Q4 2019 Order intake at similar level as in Q3– Equipment orders decreased year-on-year, but werestable sequentially– Solid service growth year-on-year Lower revenues Improved underlying margin Strong cash flow Continued focus on innovation Efficiency actions and adaptation of productportfolio and production continued3
Key financials Q4 2019Orders received, MSEK and change, % Order intake declined 2%, -7% organic Revenues declined 3%, -7% organic Operating profit at MSEK 2 016– Items affecting comparability of MSEK -115– Mainly restructuring costs and LTI– Positive contribution from currency Margin at 19.6% (20.5)– Adjusted for items affecting comparability at 20.7%– Margin diluted by lower revenues and acquisitions Operating cash flow improved to MSEK 2 827(2 242)9 800-2%9 6009 4689 4009 2769 200 2%-7%9 000 3%8 8000Q4 2018OrganicCurrencyStructure & OtherQ4 2019Revenues, operating profit and margin12 00010 0008 0006 0004 0007 41119.719.17 8797 61019.320.218.620.01 4141 4681 520Q1Q2Q32017 2017 2017Operating margin, %Revenues, MSEK10 626 10 158 10 2809 65120.221.020.420.321.718.419.720.519.721.31 8101 8982 1621 930Q4Q1Q2Q32017 2018 2018 2018Operating Profit, MSEKQ42018Q120198 46418.618.11 5289 78519.618.41 51550408 2332 000010 5589 84321.33020.719.019.62 2631 9272 016Q22019Q32019Q4201920100Adj. Operating margin, %4
Leading the way in innovationQ4 2019 Continued focus on innovations Orders received to digitalize Pocubre’s mining operations Partnership with Orica to develop a semi-automated explosivesdelivery system Pit Viper 270 XC series with advanced rig control system PowerROC D60 with Tier 4 engine New range of down-the-hole hammers No. of connected machines increasingEpiroc Pit Viper 270 XC serieswith several automation features.
Continuous strive to improve operational excellenceQ4 2019 Workforce reduced by 521 in the quarter Efficiency improvements initiated and willcontinue in the coming quarters and expected togive visible effects in the first half of 2020 Rock drilling tools factory in China closed andfacility in Sweden sold Announcement in January 2020 to consolidatedimension stone equipment manufacturing Safety and well-being – work related injurieslower for full-year 2019 Supply chain program progressing with gradualimprovements Reduction of CO2 emissions from transport
High proportion of recurring businessPer segment Q4 2019Order intake, MSEK and growth, %(Total growth / Organic growth)Revenues in the quarterEquipmentServiceTools & Attachments-2% / -7%Equipment9 4689 2763 3552 60625%36%-22% / -22%64%Service3 761 9% / 6%4 104Aftermarket(59)39% 9% / -4%Tools & Attachments2 3062 517Q4 2018Q4 20197
Segment: Equipment & ServiceOrders received, MSEK and change, % Orders received -6%, -7% organic Service orders up 6% organic– High customer activity Equipment orders down 22% organic– Investment decisions postponed7 4007 200 Margin increased to 23.9% (23.2)– Supported by currency and mix– Negatively impacted by lower revenue volumes andrestructuring costs– Sequentially, negative currency and mix7 1167 000-7%6 8006 6000 Revenues -4%, -6% organic Operating profit at MSEK 1 853, including costsrelated to efficiency improvements of MSEK -28-6%Q4 2018Organic6 710 2%-1%CurrencyStructure & OtherQ4 2019Orders received, revenues and operating margin10 0007 7407 2487 1906 874 6 7107 6777 116 8 0947 947 7 3257 702 7 3348 0005 220 5 4957 1155 788 7 4427 1786 262 5 9436 200 6 323 6 2635 4066 00025.6 26.323.9 24.6 23.2 24.223.922.3 22.6 23.3 23.0 22.94 0003530252015102 0000405Q1Q2Q3Q4Q1Q2Q32017 2017 2017 2017 2018 2018 2018Operating margin, %Revenues, MSEKOrder intake, MSEKQ42018Q12019Q22019Q32019Q4201908
Segment: Tools & AttachmentsOrders received, MSEK and change, % Orders received up 9%, -4% organic– Rock drilling tools orders negatively impacted by exitof handheld rock drilling tools and optimization ofproduct offering2 600– Hydraulic attachment tools decreased organically2 200 Revenues up 3%, -10% organic 9%2 7002 5172 5002 4002 3000Q4 2018 Margin of 11.8% (13.3)-4% 3%OrganicCurrencyStructure & OtherQ4 2019Orders received, revenues and operating margin– Costs related to efficiency improvements MSEK -173 500– Adjusted operating margin 12.5%, supported bycurrency, but diluted by acquisitions3 000– One-time costs related to acquisitions of MSEK -18 10%2 3062 5002 0001 5001 0002 760352 6652 5172 82624402 3412 9262 2452 285 2 306302 7652 6052 161 2 297 2 1412 550 2 470 2 45225032 3822 270 2 239 2 197252 22018Q32018Adj. operating margin, %Revenues, MSEKOrder intake, MSEKOperating margin, %Q42018Q12019Q22019Q32019Q4201909
Financials
Profit impacted by items affecting comparabilityQ4 2019Operating profit and margin4 0003 5003 9.718.421.720.420.520.31 9912 0001 5001 459451 521531 535151 578501 610951 0005001 4141 4681 5201 5281 51519.018.41812 0241262 1541 9895920.721.319.72 50021.32 3023919.618152 1602332 1311151291 8101 8982 1621 9302 2631 9272 0166300-8Q1 201721Q2 2017Operating margin, %Q3 2017Q4 2017Items affecting comparability*, MSEKQ1 2018Q2 2018Operating profit, MSEKQ3 2018Q4 2018Q1 2019Q2 2019Q3 2019Q4 2019Operating margin, adj., %** Q1 2017-Q4 2018 includes costs related to the split from Atlas Copco.* Q1 2017-Q4 2019 includes change in provision for long-term incentive plans.* Q4 2019 includes items affecting comparability of MSEK -115, including change in provision for long-term incentive plans of MSEK -42.11
Epiroc Group – Profit bridgeLooking into the numbersMargin: 19.6%Margin: 20.5 %2 200Adj. margin: 20.7 %-1%2 1622 1312 100-172-0.3 pp 175 1.2 ppOrganicCurrency 42-149-1.8 pp2 016 732 0001 9000Q4 2018Structure and otherQ4 2019Items affectingcomparability, excl. LTILTIAdjusted operarting profit“Structure and other” includes operating profit/loss from acquisitions and contract manufacturing MSEK -15, including a one-time item of MSEK –18, costs of MSEK -45 related to efficiency improvements, costs of MSEK -28 related tothe agreement with the departing President and CEO, split costs of MSEK 48 -11-(-59), and change in provision for long-term incentive programs MSEK -109 -42-( 67). “Items affecting comparability” includes change in provisionfor long-term incentive programs MSEK -42 , costs of MSEK -45 related to efficiency improvements, and costs of MSEK -28 related to the agreement with the departing President and CEO.12
Equipment & Service – Profit bridgeLooking into the numbersMargin: 23.9%Margin: 23.2%Adj. margin: 24.3%0%1 9001 8761 800-29-0.1 pp-139-0.4 pp 145 1.2 ppOrganicCurrency1 8811 85328Q4 2019Items affectingcomparability1 7000Q4 2018Structureand otherAdjustedoperating profit13
Tools & Attachments – Profit bridgeLooking into the numbersMargin: 13.3%330Margin: 11.8%Adj. margin: 12.5%-4%324-34 0.2 pp300312-30-2.9 pp35 1.2 pp295172700Q4 2018OrganicCurrencyStructureand otherQ4 2019Items affectingcomparabilityAdjustedoperating profitOperating profit including a one-time item of MSEK –18 related to acquisitions.14
Costs, net financials and taxQ4 2019Administration, marketing and R&D expenses Lower comparable costs– Acquisitions and currency reason for the increaseyear-on-year– Expenses adjusted for change in provision forLTI and items affecting comparability2 000301 5691 5001 239 1 277 Net financial items were MSEK -94 (-46)– Interest net was MSEK -36 (-37)1 00016.716.21 348 1 3861 16916.815.91 637 1 6631 7451 671 1 7081 4822015.915.415.517.016.416.516.61515.4 Tax expense MSEK -439 (-493)– Effective tax rate 22.5% (23.3)25105005– Guidance: below 18Q12019Q22019Q32019Q420190Expenses in % of revenuesA, M and R&D expenses, adj. for change in LTI provisions and restructuring, MSEK15
Capital structureQ4 2019Net debt and Net debt/EBITDA Net debt was MSEK 483 (1 208)0.50.40.400.20.390.390.353 1463 0272 1252 5500.141 9825 000 IFRS 16 increased net debt by MSEK 1 9564 0000.24 Net debt/EBITDA ratio at 0.05 (0.14)3 0002 4162 0001 2080.11 6592 0920.02 0120.054834041 000 Net debt/equity ratio was 1.2% (6.4) Proposed dividend for 2019, SEK 2.40– To be paid in two instalments0-0.1-0.2– Post-employment benefits MSEK 596 (283)4 2173 6410.36 0000.43-1 000-1 956Q1 2018Q2 2018Q3 2018Q4 2018Q1 2019Q2 2019Q3 2019Q4 2019-2 000Net debt/EBITDA ratioNet debt, incl. IFRS 16, end of period, MSEKNet debt, excl. IFRS 16, end of period, MSEK* Numbers for 2018 not restated for IFRS 16.16
Capital efficiencyQ4 2019Net working capital4031.9302034.431.812 15814 06231.812 89734.413 1539 99110020172018Avg. NWC/revenues, %2019Avg.NWC, MSEKQ4 2018Q4 201920 00015 000 Net working capital up 2%– For comparable units and currency adjusted, networking capital decreased 6%10 000– A reduction in both trade receivables and inventories5 000– Trade payables and advance payments were alsolower, which partly offset the improvement year-onyear0End of period, NWC, MSEKCapital employed and ROCE32.0353027.425201532.027.629 51821 67423 08650 00027.631 83830 00025 92720 00010 ROCE at 27.6% (32.0)– IFRS 16 impact 1.4 percentage points– Impacted by cash and acquisitions10 0005040 0002017ROCE, 12m, %20182019Avg. capital employed, MSEKQ4 2018Q4 20190End of period, capital employed, MSEK17
Operating cash flowQ4 2019MSEKQ4 2019Q4 2018 2 016 2 162Depreciation, amortization and impairment 482 350Capital gain/loss and other non-cash items-28-18 2 470 2 431Net financial items received/paid-25-24Taxes paid-257-326 1 062 415Investments, incl. rental equipment*-302-308Pension funding and other**-121-68 2 827 2 242 10-64Operating profitChange in working capitalOperating cash flowAcquisitions and divestmentsOperating cash flow and Net profit3 0002 8272 5002 2422 0001 5001 0001 4121 3211 313 1 2421 1111 049 1 078 1 067 1 104 1 0819447776661 5114725001990Q12017Q22017Q32017Q42017Operating cash flow, MSEK* 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.1 8831 6801 6231 5061 3741 9Net proft, MSEK18
Summary andoutlook
Continued growth in serviceKey highlights Q4 2019 Order intake at similar level as in Q3– Equipment orders decreased year-on-year, but werestable sequentially– Solid service growth year-on-year Lower revenues Improved underlying margin Strong cash flow Continued focus on innovation Efficiency actions and adaptation of productportfolio and production continued Helena Hedblom, new CEO from March 120
Demand expectations“It is clear that our customers remain cautious in making investmentdecisions. In the near-term we expect that demand will remain largely atthe level seen in the fourth quarter.”
Q&A
Disclaimer - Some statements in this presentation, or in conclusion to it, are forward-looking and theactual outcome may be different. In addition to the factors explicitly commented upon, the actualoutcome may be affected by other factors such as macroeconomic conditions, movements in foreignexchange- and interest-rates, political risks, competitor behavior, supply- and IT-disturbances.
Appendix
Geographical overviewOrders received, MSEK and % of Group ordersEquipment & ServiceNorthAmerica22%Tools & AttachmentsEurope23%8 8148 62869%64%34%31%36%2017201820197 48166%% of Group orders9 2989 00570%69%32%30%31%2017201820198 33768%Africa/MiddleEast14%SouthAmerica14%6 22518%20175 4465 3964 58486%80%70%14%20%201820194 73182%Asia/Australia27%Orders received excluding Common Group functions.5 4688 48872%63%30%28%37%2017201820199 52310 78083%81%82%19%18%17%20172018201925
Income statementQ4 2019MSEKRevenuesCost of salesGross profitGross margin, %Marketing expensesAdministrative expensesResearch and development expensesOther operating income and expensesOperating profitOperating profit margin, %Net financial itemsof which interest netProfit before taxProft margin, %Income tax expenseTax rate, %Profit for the periodItems affecting comparability in operating profitEquipment & ServiceTools & AttachmentsCorporate itemsAdjusted operating profitAdj. Operating profit margin2017Full year31 364-20 10111 26335.9%-2 280-2 121-795-1365 93018.9%-137-1325 79318.5%-1 495-25.8%4 2982018Full year38 285-24 31713 96836.5%-2 574-2 589-977-4437 38519.3%-184-1377 20118.8%-1 764-24.5%5 4372019Full year40 849-25 54715 30237.5%-2 797-3 261-1 035-738 13619.9%-293-1867 84319.2%-1 959-25.0%5 8842018Q410 558-6 7213 83736.3%-668-621-281-1052 16220.5%-46-372 11620.0%-493-23.3%1 6232019Q410 280-6 3773 90338.0%-690-848-262-872 01619.6%-94-361 92218.7%-433-22.5%1 489-394-446-28-196-2228 58221.0%882 15420.4%-115-28-17-702 13120.7%-3947 77920.3%26
Balance sheetQ4 2019MSEKIntangible assetsRental equipmentOther property, plant and equipmentInvestments in associates and joint venturesFinancial assets and other receivablesDeferred tax assetsTotal non-current assetsInventoriesTrade receivablesOther receivablesIncome tax receivablesFinancial assetsCash and cash equivalentsTotal current assetsTotal assets20172018Dec. 31 Dec. 313 1213 6201 2151 2332 2712 473942081 1011 1194255438 2279 1968 440 10 5166 2718 0051 3621 2892873331 1529441 8085 87219 320 26 95927 547 36 1552019Dec. 314 2261 2134 6132011 00763011 89010 5087 2871 5973538628 54029 14741 037% of BS10%3%11%0%2%2%29%26%18%4%1%2%21%71%100%MSEKShare capitalRetained earningsEquity attributable to owners of the parentNon-contolling interestTotal equityInterest bearing liabilitiesPost-employment benefitsOther liabilities and provisionsTotal non-current liabilitiesInterest bearing liabilitiesTrade payablesIncome tax liabilitiesOther liabilities and provisionsTotal current liabilitiesTotal equities and liabilities20172018Dec. 31 Dec. 312150012 020 18 29712 041 18 79765012 047 18 8472 2505 0951812832894122 7205 7904 8081 7023 9664 7114366053 5704 50012 780 11 51827 547 36 1552019Dec. 3150022 26122 7615222 8137 7245964238 7437054 0505074 2199 48141 037% of BS1%54%55%0%56%19%1%1%21%2%10%1%10%23%100%27
Cash flowQ4 20192017Full year2018Full year2019Full year2018Q42019Q45 9301 254-134-344-666-90-403-7934225 1767 3851 369101-483-1 747-52-1 875-8965224 3248 1361 978-252-410-2 157-61337-9155727 2282 162350-81-24-3264415-2382252 4872 016482-28-25-257-181 062-1891343 177-42470-289-1376 3235 543-57726-459-546219-1 337-48660-53716-1 137153276-1 655-1512-146-64118-241-10017-17915-3132447Cash flows from financing activitiesDividends paidDividends paid to non-controlling interestDividends paid to Atlas CopcoAcquisition of non-controlling interestSale/ Repurchase of own sharesChange in interest-bearing liabilitiesNet cash from financing activities-5 1786-889-6 061-1 3072 3671 060-2 523-8340-820-3 011-207-110-317-1 26345-181-1 399Net cash flow for the periodCash and cash equivalents, beginning of the periodExchange differences in cash and cash equivalentsOther cash flow from transactions with shareholdersCash and cash equivalents, end of the period4 658481-39-3 2921 8084 0471 808175 8722 5621 80810604 4761 9293 949-605 8721 7856 814-5908 540MSEKCash flow from operating activitiesOperating profitDepreciation, amortization and impairmentCapital gain/loss and other non-cash itemsNet financial items received/paidTaxes paidPension funding and payment of pension to employeesChange in working capitalIncrease in rental equipmentSale of rental equipmentNet cash from operating activitiesCash flows from investing activitiesInvestments in other property, plant and equipmentSale of other property, plant and equipmentInvestments in intangible assetsSale of intangible assetsAcquisition of subsidiariesDivestment of subsidiariesProceeds to/from other financial assets, netNet cash from investing activitiesMSEKOperating cash flowNet cash flow from operating activitiesNet cash from investing activitiesAcquisition and divestments of subsidiariesOther adjustmentsOperating cash flow2017Full year2018Full year2019Full year2018Q42019Q45 1765 543137-6 2464 6104 324-1 3375463513 8847 228-1 6559841316 6882 487-24164-682 2423 1777-10-3472 82728
Key ratiosQ4 20192017Full year3.551 2129.943.802018Full year4.504.491 2061 20615.633.222019Full year4.894.891 2011 20219.005.57EBITDA, MSEKEBITDA margin, %Adjusted EBIT, MSEKAdjusted EBIT margin, %7 18322.9%6 09319.4%8 75322.9%7 77920.3%10 04924.6%8 58221.0%Net working capital, end of period, MSEKAverage net working capitalAverage net working capital/revenues, %Average capital employed, MSEKReturn on capital employed, 12 month %Capital employed turnover ratioReturn on equity, 12 month %Net debt, MSEKNet debt/EBITDA ratioDebt/equity ratio, period end, %Equity/assets ratio, period end, %10 1739 99131.921 67427.41.429.15 4240.7545.043.712 89712 15831.823 08632.01.733.21 2080.146.452.113 15314 06234.429 51827.61.428.44830.052.155.6Number of workrelated accidents per million working hoursSick leave, %MWh energy from operations/Cost of sales (MSEK); 12MTransport CO2 (tonnes)/Cost of sales (MSEK); 12MNumber of employees, period endAdditional workforce, period end4.32.28.56.212 9481 3973.42.27.65.613 8471 6102.72.16.84.514 2681 366MSEKBasic earnings per share, SEKDiluted earnings per share, SEKBasic number of shares outstanding, millionsDiluted number of shares outstanding, millionsEquity per share, period end, SEKOperating cash flow per share, SEK29
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2017 22.9 Q1 2018 23.9 Q2 2018 24.6 Q3 2018 22.3 23.2 Q4 2018 24.2 Q1 2019 25.6 Q2 2019 Q3 2019 Q4 2019 23.9 Q1 2017 22.6 23.3 262 5 943 Q3 2017 Q2 2017 26.3 Operating margin, % Order intake, MSEK Reve
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