Q3 2020 - Epiroc

Q3 2020Interim report Q3 2020October 22, 2020Epiroc AB Interim Report January – September 20201 (28)

Q3 2020Epiroc interim report Q3 . 3Key figures. 3CEO comments. 4Orders and revenues. 5Profits and returns . 6Employees . 6Balance sheet . 7Cash flow . 7Covid-19 . 8Equipment & Service. 9Tools & Attachments. 11Sustainability . 13January – September in summary . 14Other information . 14Risks and uncertainty factors . 15Accounting principles . 16Condensed consolidated income statement . 17Key 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 – September 20202 (28)

Q3 2020Epiroc interim report Q3 Orders received decreased 2% to MSEK 9 373 (9 600), organic increase of 10% Revenues decreased 14% to MSEK 8 724 (10 158), organic decrease of 3% Operating profit was MSEK 1 820 (1 927), including items affecting comparability ofMSEK -76 (-233)* Operating margin improved to 20.9% (19.0). Adjusted operating margin was 21.7% (21.3)* Basic earnings per share were SEK 1.10 (1.11) Operating cash flow of MSEK 1 355 (1 883) The Board of Directors will call for an Extraordinary General Meeting on November 27and propose a second dividend of SEK 1.20 per shareKey figuresMSEKOrders receivedRevenuesOperating profitOperating margin, %Profit before taxProfit margin, %Profit for the periodOperating cash flowBasic earnings per share, SEKDiluted earnings per share, SEKReturn on capital employed, 12 months, %Net debt period end/EBITDA 12 months, ratio2020Q39 3738 7241 82020.91 74420.01 3241 3551.101.0921.6-0.412019Q39 60010 1581 92719.01 86618.41 3411 0Q1-Q327 25026 3165 17019.64 99719.03 7734 8503.133.132019Q1-Q330 21630 5696 12020.05 92119.44 3953 8613.663.66Δ-10%-14%-16%-16%-14%26%-14%-14%* Information on items affecting comparability, see page 6.Epiroc AB Interim Report January – September 20203 (28)

Q3 2020CEO commentsRecovery in orders and solid resultsThe customer demand improved compared to thesecond quarter as the effects from Covid-19 restrictionswere more moderate. Our continued focus on health andbusiness continuity, both for us and our customers, paidoff. We achieved organic order growth and I am pleasedto see the strong development in our service businessand that our customers took decisions to invest. Thelower customer activity in some markets followingCovid-19 restrictions did however impact the aftermarket business. Internally, we have adapted well andadjusted our cost base. All in all, this translated into asolid result and cash flow.Organic order growthOrders received amounted to MSEK 9 373, whichcorresponds to 23% organic growth sequentially and10% year-on-year. The order intake was stronger at theend of the quarter, both for equipment and aftermarket.Operational efficiencyThe adjusted operating margin was 21.7% (21.3). Ourefficiency actions were executed according to plan andsupported the profit. Worth noting is that the efficiencyactions that we execute around the world make us moreagile and resilient while allowing us to continue toprioritize innovation and further develop our technologyleadership.Clear priorities for the futureSo far, 2020 has been a year heavily impacted by theCovid-19 pandemic, with many related challenges. Wehave managed the situation well with the support fromdedicated colleagues, valued customers and loyalbusiness partners. Together we have made Epirocstronger for the future. And speaking of the future, withor without the pandemic, we remain focused on cellence and sustainability.We expect that the demand, both for equipment andaftermarket, will remain stable in the near term. Thatsaid, there are uncertainties regarding the Covid-19development and related restrictions, which can have anadverse effect on the demand.Demand for innovative solutionsThere is a strong and growing interest from customersin our automation, digitalization and electrificationsolutions and that is why we continue to invest and bringnew solutions to the market. Our automation solutions inoperations deliver increased productivity and improvedsafety to our customers and we won several newautomation orders in the quarter. We are happy to reportthat we have successfully deployed unique solutions formixed fleet automation - both for underground andsurface applications. It is clear that our innovationagenda goes hand in hand with our customers’sustainability agenda.Helena HedblomPresident and CEOService proving its resilienceCurrency headwinds and Covid-19 restrictions impactedrevenues negatively in the quarter. In total, the revenuesdeclined 14% to MSEK 8 724. Organically, revenuesdecreased by 3% supported by the resilient servicebusiness, which had an increase in revenues. It alsoreflects our successful and continuous work to increaseproductivity for customers.Epiroc AB Interim Report January – September 20204 (28)

Q3 2020Orders and revenuesOrders and revenues14 000140%12 000120%10 000100%8 00080%6 00060%4 00040%2 00020%00%Q318 Q418 Q119 Q219 Q319 Q419 Q120 Q220 Q320Orders received, MSEKRevenues, MSEKBook to bill, %Orders and revenuesMSEKOrders receivedRevenuesOperating profitOperating margin, %2020Q39 3738 7241 82020.92019Q39 60010 1581 92719.0Δ-2%-14%-6%2020Q1-Q327 25026 3165 17019.62019Q1-Q330 21630 5696 12020.0Δ-10%-14%-16%Orders receivedOrders received decreased 2% to MSEK 9 373 (9 600) year-on-year,corresponding to an organic growth of 10%. Currency impactednegatively with 12%. Sequentially, i.e. compared to the previous quarter,orders received increased 23% organically.Compared to the previous year, orders received in local currencyincreased in Africa/Middle East, Asia/Australia and Europe, while theydecreased in North America and South America.Mining customers represented 77% (79) of orders received in thequarter and infrastructure customers represented 23% (21).RevenuesRevenues decreased 14% to MSEK 8 724 (10 158). Organically,revenues declined 3% and currency had a negative impact of 10%. Thebook to bill ratio was 107% (95).The aftermarket represented 69% (68) of revenues in the quarter.Sales BridgeQ3 2019OrganicCurrencyStructure and otherTotalQ3 2020Epiroc AB Interim Report January – September 2020Orders receivedMSEK,Δ,%9 600 10-12-0-29 373RevenuesMSEK,Δ,%10 158-3-10-1-148 7245 (28)

Q3 2020Profits and returnsOperating profit and marginProfit bridge2 50025%2 00020%1 50015%1 00010%5005%0Q3 2019OrganicCurrencyStructure and other*TotalQ3 2020Operating profitMSEK,ΔMargin,%,Δ,pp1 92719.0-230-2.3-79 1.7 202 2.5-107 1.91 82020.9*Includes operating profit/loss from acquisitions and divestments,items affecting comparability, one-time items, and change in provisionfor share-based long-term incentive programs.0%Q318 Q418 Q119 Q219 Q319 Q419 Q120 Q220 Q320Operating profit was MSEK 1 820 (1 927), including items affectingcomparability of MSEK -76 (-233). These items include restructuringcosts of MSEK -55 (-179) and change in provision for share-based longterm incentive programs of MSEK -21 (-54). The operating profit wasnegatively impacted by the decline in revenues and currency, whilerestructuring costs were lower compared to Q3 2019. The operatingmargin was 20.9% (19.0). Excluding the items affecting comparability,the margin was 21.7% (21.3).Oper ating profit, MSEKOper ating margin, %Adjusted operating margin, %Capital employed and return oncapital employed*35 00035%30 00030%25 00025%20 00020%15 00015%10 00010%5 0005%00%Q318 Q418 Q119 Q219 Q319 Q419 Q120 Q220 Q320Average capital employed, MSEKNet financial items were MSEK -76 (-61). Interest net wasMSEK -36 (-54).Profit before tax was MSEK 1 744 (1 866), corresponding to a margin of20.0% (18.4). Income tax expense amounted to MSEK -420 (-525),corresponding to an effective tax rate of 24.1% (28.1).Profit for the period totaled MSEK 1 324 (1 341). Basic earnings pershare were SEK 1.10 (1.11).The return on capital employed during the last 12 months was 21.6%(29.5), affected by lower profit as well as by increased capital employed,mainly from accumulation of cash. Return on equity was 22.4% (30.6)Return on capital employed, 12 month, %*Numbers for 2018 are not restated for IFRS 16.EmployeesOn September 30, 2020, the number of employees was 13 902 (14 670).The number of consultants/external workforce was 1 108 (1 485). Forcomparable units, the total workforce decreased with 782 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 – September 20206 (28)

Q3 2020Balance sheetNet working capital16 00040%14 00035%12 00030%10 00025%8 00020%6 00015%4 00010%2 0005%00%Q318 Q418 Q119 Q219 Q319 Q419 Q120 Q220 Q320Net wor king capital, end of per iod, MSEKAverage net working capital/r evenues, %Net debt / net cash5 0000.504 0000.403 0000.302 0000.201 0000.1000.00-1 000-0.10-2 000-0.20-3 000-0.30-4 000-0.40-5 000Net working capitalCompared to the previous year, the net working capital decreased 22%,of which 12% related to currency, to MSEK 11 821 (15 120). As apercentage of revenues the last 12 months, the average net workingcapital was 35.9% (34.3).Efficiency improvement activities The cost-savings program of more than MSEK 500 annually hasbeen completed, with full impact in the third quarter. Additionalsavings from planned actions, including the reduction of staff inSweden, will be achieved from the end of the year. Savings from short-term actions were maintained at a good level inthe quarter. The supply-chain improvement program for parts and consumablescontinued according to plan.DividendEpiroc has a strong financial position and as the economic uncertaintyhas been reduced, the Board of Directors proposes a second dividendof SEK 1.20 per share. The Board will call for an Extra General Meetingon November 27, 2020, to decide on the proposal, with record dateDecember 1, 2020. Including the dividend paid in May, the total dividendduring the year will be SEK 2.40 per share totaling MSEK 2 892 (2 523).Net cash / net debtThe Group’s net cash position amounted to MSEK 3 638 (previous year:net debt of 2 416). The net debt/EBITDA ratio was -0.41 (0.24).-0.50Q318 Q418 Q119 Q219 Q319 Q419 Q120 Q220 Q320Net debt ( ) / net cash (-), end of period, MSEKNet debt/EBITDA, ratioCash flowOperating cash flow, MSEK3 0002 500Operating cash flowThe operating cash flow amounted to MSEK 1 355 (1 883). The workingcapital increased MSEK 32 (decreased 126). Inventories decreased, butthis was offset by an increase in receivables due to higher revenues anda seasonal reduction of payables.2 000Acquisitions and divestmentsCash flow from acquisitions and divestments was MSEK -31 ( 33).1 5001 0005000Q318 Q418 Q119 Q219 Q319 Q419 Q120 Q220 Q320Epiroc AB Interim Report January – September 20207 (28)