Q4 2020 - Epiroc

Q4 2020Interim report Q4 2020January 26, 2021Epiroc AB Interim Report January – December 20201 (28)

Q4 2020Epiroc interim report Q4 . 3Key figures. 3CEO comments. 4Orders and revenues. 5Profits and returns . 6Employees . 6Balance sheet . 7Cash flow . 7Dividend and mandatory redemption of shares . 8Covid-19 . 8Equipment & Service. 9Tools & Attachments. 11Sustainability . 13Full year 2020 in summary . 14Other information . 14Risks and uncertainty factors . 14Accounting principles . 15Condensed consolidated income statement . 16Key ratios . 17Condensed consolidated statement of comprehensive income . 18Condensed consolidated balance sheet . 19Fair value of derivatives and borrowings . 20Condensed consolidated statement of changes in equity . 21Condensed consolidated statement of cash flows . 22Condensed segments quarterly . 23Geographical distribution of orders received. 24Geographical distribution of revenues . 24Condensed parent company income statement . 25Condensed parent company balance sheet . 25Acquisitions and divestments . 26Transactions with related parties . 26Share buy-backs. 26Financial definitions . 26Epiroc in brief . 27Financial goals . 27Sustainability goals and KPIs . 27Financial calendar . 28Further information . 28Epiroc AB Interim Report January – December 20202 (28)

Q4 2020Epiroc interim report Q4 Orders received increased 1% to MSEK 9 329 (9 276), organic increase of 13% Revenues decreased 5% to MSEK 9 806 (10 280), organic increase of 6% Operating profit increased 10% to MSEK 2 212 (2 016), including items affecting comparabilityof MSEK -67 (-115)* Operating margin improved to 22.6% (19.6). Adjusted operating margin was 23.2% (20.7)* Basic earnings per share was SEK 1.35 (1.23) Operating cash flow was MSEK 2 156 (2 827) Agreement to acquire the mining software company MineRP The Board proposes a distribution to shareholders of SEK 5.50 per share through Dividend for 2020 of SEK 2.50 (2.40) per share to be paid in two equal installments A distribution of SEK 3.00 per share through mandatory redemption of sharesKey figuresMSEKOrders receivedRevenuesOperating profitOperating margin, %Profit before taxProfit margin, %Profit for the periodOperating cash flowBasic earnings per share, SEKReturn on capital employed, 12 months, %Net debt/EBITDA, ratio2020Q49 3299 8062 21222.62 09021.31 6372 1561.352019Q49 27610 2802 01619.61 92218.71 4892 8271.23Δ1%-5%10%9%10%-24%10%2020FY36 57936 1227 38220.47 08719.65 4107 0064.4821.7-0.452019FY39 49240 8498 13619.97 84319.25 8846 6884.8927.60.05Δ-7%-12%-9%-10%-8%5%-8%* Information on items affecting comparability, see page 6.Epiroc AB Interim Report January – December 20203 (28)

Q4 2020CEO commentsAgility in a challenging 2020The Covid-19 pandemic affected us significantly in2020, yet we managed to adapt our way of working,lower our costs, prioritized innovation, show resilience inour profitability, and deliver a solid result. We did thiswhile prioritizing health and safety and supporting ourcustomers in this unique and challenging situation. I amproud to see the way our organization has been able toadapt to the situation.The demand recovered in the second half of the yearand for the full year 2020, our organic order intake wasunchanged and amounted to MSEK 36 579. Revenues,however, declined 5% organically to MSEK 36 122,mainly due to lower equipment volumes. Our servicebusiness showed resilience throughout the year. This incombination with our efficiency measures supported ouroperating margin, which improved to 20.4%. We alsohad a solid operating cash flow of MSEK 7 006. TheBoard proposes a distribution to shareholders of SEK5.50 per share; a dividend of SEK 2.50 and SEK 3.00through mandatory redemption.Organic order growth in all businesses in Q4The customer demand remained largely at the samelevel as in Q3. Both our customers’ and our ownoperations were, with few exceptions, up and running.We continued to see that our customers took decisionsto invest in new equipment and we achieved organicorder growth in all our businesses, with the highestgrowth achieved in Equipment & Service. Ordersreceived for the Group were MSEK 9 329, corresponding to 13% organic growth compared to last year and to2% organic growth sequentially.We expect that the demand, both for equipment andaftermarket, will remain stable in the near term.Uncertainty, however, still remains regarding the Covid19 development and any further related restrictions.Organic revenue growth and improved profitabilityRevenues were MSEK 9 806, up 6% organically withsolid growth for our aftermarket business. Serviceperformed particularly well and had an organic revenuegrowth of 13%. This in combination with cost savingscontributed to an improved operating margin, despite anegative currency effect. The adjusted margin improvedto 23.2%, with strong contribution from Tools &Attachments.Epiroc AB Interim Report January – December 2020Technology leadershipAutomation, digitalization and electrification solutionsare in high demand and we connect more and moremachines. We continue to win orders and we are proudof our market-leading solutions that are globallydeployed and proven. They enable increased productivity, safety and sustainability for our customers.We invest heavily in research and development toremain the technology leader. In Q4 we agreed toacquire MineRP that supports large and medium-sizedmines in optimizing their operational efficiency byproviding a leading software platform solution that integrates all technical mining data.Engaged employees andimproved sustainability resultsOur employee survey showed that the engagement levelrose in 2020, despite the pandemic, and remained wellabove the external benchmark. We also achievedimproved sustainability results, with a significant reduction in lost-time injury frequency rate and decreased CO2emissions, both from operations and from transport.Strategy for profitable growthOur strategy is to be the market leader in our selectedniches and we continue to prioritize innovation, aftermarket, operational excellence and sustainability. Ourinnovation agenda goes hand-in-hand with our customers’ sustainability agenda, which creates many opportunities for us. I see Epiroc as an enabler in the transitiontowards sustainable mining and infrastructure. By offering best-in-class solutions – with automation, digitalization and electrification – and always being close to ourcustomers, we will further strengthen the relationshipswith our customers and make Epiroc even stronger.Helena HedblomPresident and CEO4 (28)

Q4 2020Orders and revenuesOrders and revenuesMSEKOrders receivedRevenuesOperating profitOperating margin, %2020Q49 3299 8062 21222.62019Q49 27610 2802 01619.6Δ1%-5%10%2020FY36 57936 1227 38220.42019FY39 49240 8498 13619.9Δ-7%-12%-9%Orders receivedOrders received increased 1% to MSEK 9 329 (9 276) year-on-year,corresponding to an organic growth of 13%. Currency impactednegatively with 12%. Sequentially, i.e. compared to the previous quarter,orders received increased 2% organically.Compared to the previous year, orders received in local currencyincreased in all regions. Double-digit growth was achieved in SouthAmerica, Europe and Asia/Australia.Mining customers represented 75% (76) of orders received in thequarter and infrastructure customers 25% (24).RevenuesRevenues decreased 5% to MSEK 9 806 (10 280). Organically,revenues increased 6%, but currency had a negative impact of 11%.The book to bill ratio was 95% (90).The aftermarket represented 65% (64) of revenues in the quarter.Sales BridgeQ4 2019OrganicCurrencyStructure and otherTotalQ4 2020Epiroc AB Interim Report January – December 2020Orders receivedMSEK,Δ,%9 276 13-120 19 329RevenuesMSEK,Δ,%10 280 6-110-59 8065 (28)

Q4 2020Profits and returnsProfit bridgeQ4 2019OrganicCurrencyStructure and other*TotalQ4 2020Operating profitMSEK,ΔMargin,%,Δ,pp2 01619.6 436 3.1-318-0.9 78 0.8 196 3.02 21222.6*Includes operating profit/loss from acquisitions and divestments,one-time items and items affecting comparability (incl. change inprovision for share-based long-term incentive programs).The operating profit increased 10% to MSEK 2 212 (2 016), includingitems affecting comparability of MSEK -67 (-115). These items includerestructuring costs of MSEK -15 (-45) and change in provision for sharebased long-term incentive programs of MSEK -52 (-42). The previousyear also included costs of MSEK -28 related to the agreement with thedeparting President and CEO. The operating profit was positivelyimpacted by increased revenue volumes and cost savings, butnegatively impacted by currency. The operating margin increased to22.6% (19.6). Excluding the items affecting comparability, the marginwas 23.2% (20.7).Net financial items were MSEK -122 (-94). Interest net wasMSEK -29 (-35).Profit before tax was MSEK 2 090 (1 922), corresponding to a margin of21.3% (18.7). Income tax expense amounted to MSEK -453 (-433),corresponding to an effective tax rate of 21.7% (22.5).Profit for the period totaled MSEK 1 637 (1 489). Basic earnings pershare were SEK 1.35 (1.23).The return on capital employed during the last 12 months was 21.7%(27.6), affected by increased capital employed, mainly from accumulation of cash. Return on equity was 22.7% (28.3).*Numbers for 2018 are not restated for IFRS 16.EmployeesOn December 31, 2020, the number of employees was 13 840 (14 268).The number of consultants/external workforce was 1 109 (1 366). Forcomparable units, the total workforce decreased with 686 compared tothe previous year. The reduction is mainly related to manufacturing,administration and marketing, while the workforce in service andresearch and development has been stable.Epiroc AB Interim Report January – December 20206 (28)

Q4 2020Balance sheetNet working capitalCompared to the previous year, the net working capital decreased 20%,of which 13% related to currency, to MSEK 10 571 (13 153). As apercentage of revenues the last 12 months, the average net workingcapital was 33.8% (34.4).Efficiency improvements The cost-savings program of more than MSEK 500 annually hasbeen completed, with full impact in the quarter. Additional savings from planned actions, including the reduction ofstaff in Sweden, was achieved partly in Q4. The remaining savingsare expected in 2021. Savings from short-term actions were maintained at a good level inthe quarter. The supply-chain improvement program for parts and consumablescontinues to be implemented according to plan, with some delays inpositive effects coming through due to the pandemic.Net cash / net debtThe Group’s net cash position amounted to MSEK 4 137 (previous year:net debt of 483). A second dividend was paid in December 2020 andamounted to MSEK 1 447 (1 263). The net debt/EBITDA ratio was -0.45(0.05).*Numbers for 2018 are not restated for IFRS 16.Cash flowOperating cash flowCash was released from working capital, mainly due to lowerinventories, but to a lesser extent than in the previous year. The workingcapital decreased by MSEK 687 (decreased 1 062), impacting theoperating cash flow, which decreased 24% to MSEK 2 156 (2 827).Acquisitions and divestmentsCash flow from acquisitions and divestments was MSEK -1 ( 10).Epiroc AB Interim Report January – December 20207 (28)