Interim report Q4 2019 January 31, 2020 Per Lindberg, President and CEO Anders Lindén, CFO
Record revenues and profit in a strong 2019 Key highlights full-year 2019 Revenues and operating margin • Strong growth of our service business, but negative development for equipment 45 000 45 40 849 • High interest for automation and information 40 000 40 +9% 38 285 management, and for battery-electric vehicles 35 000 35 31 364 • Three acquisitions 30 000 28 663 30 27 102 • Efficiency actions 25 000 25 21.0 • Financials 20.3 19.4 19.4 20 000 20 17.8 19.9 – 19.3 Revenues increased 7% 18.9 18.1 15 000 16.8 15 – Operating profit +10% 10 000 10 – Reported operating margin 19.9% 5 000 5 – Adjusted operating margin 21.0% 0 0 • Strong operating cash flow at MSEK 6 688 2015 2016 2017 2018 2019 Operating margin, % • Proposed dividend of SEK 2.40 (2.10) per share Revenues, MSEK Operating margin, %, adjusted 2
Continued growth in service Key highlights Q4 2019 • Order intake at similar level as in Q3 – Equipment orders decreased year-on-year, but were stable sequentially – Solid service growth year-on-year • Lower revenues • Improved underlying margin • Strong cash flow • Continued focus on innovation • Efficiency actions and adaptation of product portfolio and production continued 3
Key financials Q4 2019 Orders received, MSEK and change, % • Order intake declined 2%, -7% organic 9 800 -2% 9 600 9 468 • Revenues declined 3%, -7% organic 9 400 9 276 9 200 +2% -7% • Operating profit at MSEK 2 016 9 000 +3% – 8 800 Items affecting comparability of MSEK -115 – Mainly restructuring costs and LTI 0 – Q4 2018 Organic Currency Structure & Other Q4 2019 Positive contribution from currency Revenues, operating profit and margin • Margin at 19.6% (20.5) 12 000 50 10 558 10 626 10 158 10 280 – 9 843 9 785 Adjusted for items affecting comparability at 20.7% 9 651 10 000 40 8 464 8 233 7 879 7 610 7 411 – Margin diluted by lower revenues and acquisitions 8 000 30 21.7 21.3 6 000 21.0 20.7 20.4 20.3 20.2 20.2 19.7 19.6 19.3 18.6 • Operating cash flow improved to MSEK 2 827 20 21.3 4 000 20.5 20.0 19.7 19.7 19.6 19.1 19.0 18.6 18.1 18.4 18.4 (2 242) 10 2 000 2 162 2 263 1 898 1 930 1 927 2 016 1 810 1 520 1 528 1 515 1 414 1 468 0 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2017 2017 2017 2017 2018 2018 2018 2018 2019 2019 2019 2019 Operating margin, % Operating Profit, MSEK Revenues, MSEK Adj. Operating margin, % 4
Leading the way in innovation Q4 2019 • Continued focus on innovations • Orders received to digitalize Pocubre’s mining operations • Partnership with Orica to develop a semi-automated explosives delivery 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 increasing Epiroc Pit Viper 270 XC series with several automation features.
Continuous strive to improve operational excellence Q4 2019 • Workforce reduced by 521 in the quarter • Efficiency improvements initiated and will continue in the coming quarters and expected to give visible effects in the first half of 2020 • Rock drilling tools factory in China closed and facility in Sweden sold • Announcement in January 2020 to consolidate dimension stone equipment manufacturing • Safety and well-being – work related injuries lower for full-year 2019 • Supply chain program progressing with gradual improvements • Reduction of CO 2 emissions from transport
High proportion of recurring business Per segment Q4 2019 Order intake, MSEK and growth, % Revenues in the quarter (Total growth / Organic growth) Equipment Service Tools & Attachments -2% / -7% 9 468 9 276 25% 2 606 Equipment 3 355 36% -22% / -22% 64% Aftermarket (59) 4 104 +9% / +6% Service 3 761 39% +9% / -4% 2 517 Tools & Attachments 2 306 Q4 2018 Q4 2019 7
Segment: Equipment & Service Orders received, MSEK and change, % • Orders received -6%, -7% organic 7 400 -6% 7 200 7 116 • Service orders up 6% organic 7 000 – -7% High customer activity 6 800 6 710 -1% +2% 6 600 • Equipment orders down 22% organic – Investment decisions postponed 0 Q4 2018 Organic Currency Structure & Other Q4 2019 • Revenues -4%, -6% organic Orders received, revenues and operating margin • Operating profit at MSEK 1 853, including costs 10 000 40 7 740 7 248 7 190 6 874 6 710 7 116 7 677 35 related to efficiency improvements of MSEK -28 8 094 7 442 7 947 7 325 7 702 7 334 8 000 5 220 5 495 5 788 7 115 7 178 30 6 200 6 323 6 263 6 262 5 943 • Margin increased to 23.9% (23.2) 5 406 25 6 000 26.3 25.6 24.6 24.2 23.9 23.9 23.3 23.2 20 23.0 22.9 22.6 22.3 – Supported by currency and mix 4 000 15 – Negatively impacted by lower revenue volumes and 10 2 000 5 restructuring costs 0 0 – Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Sequentially, negative currency and mix 2017 2017 2017 2017 2018 2018 2018 2018 2019 2019 2019 2019 Operating margin, % Revenues, MSEK Order intake, MSEK 8
Segment: Tools & Attachments Orders received, MSEK and change, % • Orders received up 9%, -4% organic +9% 2 700 2 600 – Rock drilling tools orders negatively impacted by exit 2 517 2 500 of handheld rock drilling tools and optimization of 2 400 +10% 2 306 product offering 2 300 -4% +3% 2 200 – Hydraulic attachment tools decreased organically • Revenues up 3%, -10% organic 0 Q4 2018 Organic Currency Structure & Other Q4 2019 • Margin of 11.8% (13.3) Orders received, revenues and operating margin 2 760 – 3 500 35 Costs related to efficiency improvements MSEK -17 2 665 2 826 2 517 2 440 2 341 2 926 2 765 2 245 2 285 3 000 30 2 605 2 306 – 2 161 Adjusted operating margin 12.5%, supported by 2 297 2 550 2 141 2 503 2 470 2 452 2 382 2 500 2 270 25 2 239 2 197 2 139 currency, but diluted by acquisitions 2 000 20 – One-time costs related to acquisitions of MSEK -18 12.5 1 500 12.2 15 14.8 14.8 14.6 14.6 14.3 14.3 14.2 14.2 13.6 13.6 13.3 13.3 13.0 13.0 1 000 12.8 12.8 10 12.4 12.4 11.8 10.2 10.2 500 5 5.7 0 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2017 2017 2017 2017 2018 2018 2018 2018 2019 2019 2019 2019 Adj. operating margin, % Revenues, MSEK Order intake, MSEK Operating margin, % 9
Financials
Profit impacted by items affecting comparability Q4 2019 Operating profit and margin 4 000 24 21.7 21.3 21.0 20.7 20.4 20.3 20.2 20.2 3 500 21 19.7 19.6 19.3 21.3 18.6 20.5 20.0 19.7 19.7 19.6 3 000 19.1 18 19.0 18.6 18.4 18.4 18.1 2 500 2 302 15 2 154 2 160 39 2 131 1 991 2 024 1 989 115 233 2 000 12 126 59 181 1 610 1 578 1 535 1 521 1 459 50 95 15 1 500 9 53 45 2 263 2 162 1 000 2 016 6 1 930 1 927 1 898 1 810 1 528 1 520 1 515 1 468 1 414 500 3 0 -8 0 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Operating margin, % Items affecting comparability*, MSEK Operating profit, MSEK Operating 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 bridge Looking into the numbers Margin: 20.5 % Margin: 19.6% Adj. margin: 20.7 % -1% 2 200 2 162 2 131 +42 -149 2 100 -172 +175 -1.8 pp -0.3 pp +1.2 pp +73 2 016 2 000 1 900 0 Q4 2018 Organic Currency Structure and other Q4 2019 Items affecting LTI Adjusted operarting profit comparability, excl. LTI “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 to the 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 provision for 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 bridge Looking into the numbers Margin: 23.2% Margin: 23.9% Adj. margin: 24.3% 0% 1 900 1 881 1 876 -29 1 853 28 -0.1 pp +145 -139 1 800 +1.2 pp -0.4 pp 1 700 0 Q4 2018 Organic Currency Structure Q4 2019 Items affecting Adjusted and other comparability operating profit 13
Tools & Attachments – Profit bridge Looking into the numbers Margin: 13.3% Margin: 11.8% Adj. margin: 12.5% -4% 330 324 312 -30 35 -34 -2.9 pp +1.2 pp +0.2 pp 17 300 295 270 0 Q4 2018 Organic Currency Structure Q4 2019 Items affecting Adjusted and other comparability operating profit Operating profit including a one-time item of MSEK – 18 related to acquisitions. 14
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