Interim report Q4 2018 - Epiroc...Q4 2018 Orders received SEK million Δ, % Revenues SEK million Δ,...

Interim report

Q4 2018

February 5, 2019

Per Lindberg, President and CEO

Anders Lindén, CFO

© 2019 by Epiroc. All rights reserved.

Key highlights

• High demand and growth

– Orders received +16%

– Revenues +22%

– Operating profit +25%

– Adjusted operating margin 20.3%

• Increased pace of introducing new products

• Acquisitions to enhance customer offerings

– Six acquisitions closed and two more agreed

• Establishment of Epiroc

– Listing on Nasdaq in June

Full year 2018

0

3

6

9

12

15

18

21

24

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

2015 2016 2017 2018

Revenues, SEK million Operating margin, %

Operating margin, adj., %

2


Key highlights

• A solid finish to a strong year

• Continued good customer demand

– Organic growth vs. Q4 2017

– Order intake at same level as Q3 2018

• Strong revenue and profit growth

• Improved operating margin

• Strong operating cash flow

– Release of working capital

• Four acquisitions agreed in the quarter

Q4 2018

3


Key financials

• Organic order growth of 11%

• Organic revenue growth of 19%

• Reported operating profit SEK 2,162 million

(1,528) – margin at 20.5% (18.1)

– Effect of split cost and change in provision for

incentive programs SEK +8 million (-50)

– Adjusted operating margin 20.4% (18.6)

• Basic earnings per share SEK 1.35 (0.91)

• Operating cash flow SEK 2,242 million (944)

• Proposed dividend of SEK 2.10 per share

Q4 2018

8,058

9,4688,464

10,558

0%

5%

10%

15%

20%

25%

30%

0

2,000

4,000

6,000

8,000

10,000

12,000

Q4 2017 Q4 2018

Orders received, SEK million Revenues, SEK million

Operating margin, % Operating margin, adj., %

4


Orders received

Q4 2018 – change in local currency

5

25%

18%

21%

13%

23%

North America South America

Europe Africa/Middle East

Asia/Australia

73%

27%

Mining Infrastructure

North America

+36%

South America

+29%

Africa/Middle East

+0%

Europe

-4%

Asia/Australia

+16% Orders received by customer type 2018

Orders received by region Q4 2018


RevenuesQ4 2018 - aftermarket 59%

Equipment Service Tools & Attachments

Segments

6

2,6763,355

3,112

3,761

2,197

2,306

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

Q4 2017 Q4 2018

Orders received, SEK millionOrganic order growth, %

Equipment Service Tools & Attachments

+1%

+16%

+17%


Equipment & Service

• Good sentiment in the market


– Equipment +17%

– Service +16%


• Operating margin increased to 23.2% (23.0)

• Acquisition of 34% in ASI Mining

7

0%

3%

6%

9%

12%

15%

18%

21%

24%

27%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

Q12017

Q22017

Q32017

Q42017

Q12018

Q22018

Q32018

Q42018


Operating margin, %


Tools & Attachments

• Good business environment


– Impact from measures to improve product mix

and efficiency actions


• Operating margin improved to 13.3% (10.2)

• Agreement to acquire manufacturers of

exploration drilling tools and rock

reinforcement products

– Total turnover of about SEK 1.2 billion

8

0%

2%

4%

6%

8%

10%

12%

14%

16%

0

500

1,000

1,500

2,000

2,500

3,000

Q12017

Q22017

Q32017

Q42017

Q12018

Q22018

Q32018

Q42018


Operating margin,%


Business development / Innovations

• Second generation battery equipment

– Larger fossil-free machines

• Agreement with Ericsson

– Ecosystem required for automation and

digitalization

• New drum cutters strengthen our offering in

hydraulic attachments

Q4 2018

Financials


Orders received and revenues

Trend Sales bridge

Q4 2018

Orders received

SEK million

Δ, %

Revenues

SEK million

Δ, %

Q4 2017 8,058 8,464

Organic +11 +19

Currency +3 +3

Structure and other +3 +3

Total +17 +25

Q4 2018 9,468 10,558

11

0%

25%

50%

75%

100%

125%

0

2,500

5,000

7,500

10,000

12,500

Q12017

Q22017

Q32017

Q42017

Q12018

Q22018

Q32018

Q42018


Book-to-bill, %


Operating profit and margin

Trend Profit bridge

Q4 2018

Operating profit

SEK million

Margin, %

Δ, pp

Q4 2017 1,528 18.1

Organic +407 +1.0

Currency +143 +1.0

Structure and other* +84 +0.4

Total +634 +2.4

Q4 2018 2,162 20.5

0%

5%

10%

15%

20%

25%

0

500

1,000

1,500

2,000

2,500

Q12017

Q22017

Q32017

Q42017

Q12018

Q22018

Q32018

Q42018

Split and incentive, SEK million Operating profit, SEK million

Operating margin, % Operating margin, adj., %

*Includes one-time costs related to the split from Atlas Copco and changes in provision

for share-based long-term incentive programs.

*Includes operating profit/loss from acquisitions, contract manufacturing, one-time costs, and

changes in provision for share-based long-term incentive programs.

.


Income statement

SEK million Q4 2018 Q4 2017* 2018 2017*

Revenues 10,558 8,464 38,285 31,364

Cost of sales -6,721 -5,563 -24,317 -20,101

Gross profit 3,837 2,901 13,968 11,263

Gross profit margin 36.3% 34.3% 36.5% 35.9%

Marketing and administration expenses -1,289 -1,166 -5,163 -4,401

Research and development expenses -281 -232 -977 -795

Other expenses from operations -105 25 -443 -137

Operating profit 2,162 1,528 7,385 5,930

Operating margin 20,5% 18.1% 19.3% 18.9%

Net financial items -46 -85 -184 -137

- of which interest net -37 -109 -137 -132

Profit before tax 2,116 1,443 7,201 5,793

Profit margin 20.0% 17.0% 18.8% 18.5%

Income tax expense -493 -339 -1,764 -1,495

Tax rate 23.3% 23.5% 24.5% 25.8%

Profit for the period 1,623 1,104 5,437 4,298

Q4 2018

• Increased R&D expenses

• Tax rate 23.3% (23.5)

• Interest net SEK 37 million

2018

• Earnings per share SEK 4.50

• Board proposes a dividend of

SEK 2.10 per share to be

paid in two installments

13

*Financial statements prior to 2018 are combined.


Balance sheet

SEK million Dec 31, 2018 Dec. 31, 2017*

Intangible assets 3,620 3,121

Rental equipment 1,233 1,215

Other non-current assets 4,343 3,891

Inventories 10,516 8,440

Receivables 9,627 7,920

Current financial assets 944 1,152

Cash and cash equivalents 5,872 1,808

Total assets 36,155 27,547

Total equity 18,847 12,047

Interest bearing liabilities 7,080 7,239

Non-interest-bearing liabilities 10,228 8,261

Total equity and liabilities 36,155 27,547

• Refinancing

– S&P BBB+ long term issuer credit rating with

stable outlook

• IFRS 16

14



Epiroc Group - Net working capital

0%

6%

12%

18%

24%

30%

36%

42%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Q12017

Q22017

Q32017

Q42017

Q12018

Q22018

Q32018

Q42018

Net working capital, end of period (SEK million)

Average net working capital/revenues (12 months, %)

• Working capital decreased sequentially

– Average net working capital/revenues 31.8%

• Supply-chain program progressing according

to plan

15


Epiroc Group - Net debt

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.45

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Q1 2018 Q2 2018 Q3 2018 Q4 2018

Net debt (SEK million, end of period)

Net debt/EBITDA ratio

• Net debt SEK 1,208 million

• Net debt/EBITDA 0.14

• IFRS 16

– Net debt will increase with SEK 2.0 billion

• No impact on net debt from refinancing

16


Cash flow

SEK million Q4 2018 Q4 2017*

Operating profit 2,162 1,528

Depreciation, amortization and impairment 350 341

Capital gain/loss and other non-cash items -81 -112

2,431 1,757

Net financial items received/paid -24 -279

Taxes paid -326 -180

Pension funding 4 -13

Change in working capital 415 -157

Increase in rental equipment, net -13 -112

Net cash from operating activities 2,487 1,016

Investments in PPE, net -149 -76

Investments in intangible assets -146 -73

Other investments, net 118 3,011

Other adjustments -68** -2,934***

Operating cash flow 2,242 944

Acquisitions of subsidiaries 64 0

• Operating cash flow SEK 2,242 million

• Working capital decreased

17


**Mainly currency hedges of loans and divestment of Payment Solutions credit portfolios.

***Mainly changes in cash-pool with Atlas Copco and currency hedges of loans.

Summary


Key highlights

• A solid finish to a strong year

• Continued good customer demand

– Organic growth vs. Q4 2017

– Order intake at same level as Q3 2018

• Strong revenue and profit growth

• Improved operating margin

• Strong operating cash flow

– Release of working capital

• Four acquisitions agreed in the quarter

• Near-term demand expected to remain at

current level

Q4 2018

19

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

Interim report Q4 2018 - Epiroc...Q4 2018 Orders received SEK million Δ, % Revenues SEK million Δ,...

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