Release Date: October 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Epiroc AB (EPIAF, Financial) reported a record high in large equipment orders, amounting to SEK1.4 billion, indicating strong demand from mining customers.
- The company achieved an 8% growth in orders received year-on-year, with a strong organic growth of 6%, driven primarily by mining.
- Epiroc AB (EPIAF) showcased several groundbreaking innovations at MINExpo, including the hybrid Minetruck MT66 S eDrive, which attracted significant interest.
- The company has made progress in sustainability, with a 24% reduction in CO2e emissions from operations and a high sustainability score from EcoVadis.
- Epiroc AB (EPIAF) has improved its safety metrics, with a decrease in the total recordable injury frequency rate, and has increased diversity within its workforce.
Negative Points
- The construction segment remained weak, particularly impacting the attachment business, with further softening in the US market.
- The operating profit was flat year-over-year, and the adjusted operating margin decreased from 21.8% to 19.7%, partly due to impairments of intangible assets.
- The tools & attachments segment experienced a negative impact on margins due to acquisitions, particularly from Stanley Infrastructure, which had lower profitability.
- Epiroc AB (EPIAF) faced a negative organic order development of minus 3% sequentially compared to the previous quarter.
- The company reported an increase in net debt, driven by recent acquisitions, and a higher net working capital, which is not satisfactory year-on-year.
Q & A Highlights
Q: Can you provide details on the P&L impact from workforce reductions and how this will affect future quarters?
A: Workforce reductions have been precise, focusing on aligning the attachment business with demand and improving service margins. Reductions occurred across all divisions, with significant impacts in service and attachments. The full effect of Q2 reductions was seen in Q3, and Q3 reductions will fully impact Q4. We expect costs to trend downwards.
Q: How long should we expect the elevated equipment mix, given the strong equipment orders?
A: The elevated equipment mix depends on the level of large orders, which are lumpy by nature. We continue to see a strong pipeline for replacement deals and mine expansions, which will influence the equipment mix.
Q: Can you explain the negative profitability impact in the tools & attachments segment, particularly related to Stanley Infrastructure?
A: The negative impact is mainly due to Stanley Infrastructure, which had lower profitability in Q3 compared to Q2. This includes inventory step-up items and amortization. Stanley's EBITA level is now mid-single-digit, down from low double-digit.
Q: What measures are being taken to address the cost structure in Stanley Infrastructure and tools & attachments?
A: We are focusing on cost measures, including workforce adjustments and site consolidations. This includes closing the Essen facility and one of Stanley's sites. These actions will take time to show full results, but they are ongoing.
Q: How is the electrification of mining equipment progressing, and what impact does it have on revenue?
A: Electrification is progressing well, with more customers placing repeat orders for battery electric vehicles (BEVs). Utilization of the BEV fleet has tripled in the last 12 months. While still a small portion of revenue, the offering is expanding with fossil-free solutions like trolley systems and hybrids.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
