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February 5, 2019
October – December 2018 in brief
• Orders received increased 17% to SEK 9,468 million (8,058), organic growth of 11%
• Revenues increased 25% to SEK 10,558 million (8,464), organic growth of 19%
• Operating profit was SEK 2,162 million (1,528), including costs related to the split from Atlas Copco and change in provision for long-term incentive programs of net SEK +8 million (-50)
• Operating margin was 20.5% (18.1) and adjusted for split costs and change in provision for long-term incentive programs the margin was 20.4% (18.6)
• Basic earnings per share were SEK 1.35 (0.91)
• Operating cash flow of SEK 2,242 million (944)
• Agreements regarding four acquisitions
• The Board proposes a dividend of SEK 2.10 per share to be paid in two installments
A solid finish in Q4…
In the fourth quarter, orders received were SEK 9,468 million, corresponding to an organic growth of 11% compared to Q4 2017, and largely unchanged sequentially. We have been able to ramp up our capacity in manufacturing and service to support our customers, and revenues reached a record SEK 10,558 million, up 19% organically. Our operating profit increased by 41% to SEK 2,162 million. The profitability improved with support from both organic growth and currency. For Tools & Attachments, the margin improved reinforced by our efficiency actions. The costs related to the split from Atlas Copco are gradually decreasing as planned, and including a positive change in provision for long-term incentive programs the impact was, net, SEK +8 million. The operating margin was 20.4% (18.6) excluding these items. We had a strong cash flow in the quarter, supported by the strong operating profit and a reduction of working capital.
…and a strong first year for Epiroc
In our first year as Epiroc we achieved strong growth in both top and bottom line, in parallel to a successful split and introduction of the new company. Reported orders and revenues increased 16% and 22%, respectively. Our operating profit increased by 25% and the operating margin, adjusted for split costs and provision for long-term incentive programs, increased from 19.4% to 20.3%.
Demand expected to remain at a good level
The customer demand for our equipment, services and tools remained at a good level during the quarter. In mining we continue to see that the majority of the equipment orders are for expansion, including also some orders for greenfield projects. The demand remained robust in infrastructure. Our aftermarket business was supported by the high activity among our customers and achieved strong growth. The mineral prices did not change materially during the quarter and our customers seem reasonably confident about the future. While we expect the demand to continue to remain at the current level in the near-term, there are uncertainties related to the development of the economic cycle and global trade tensions.
We continue to innovate and develop our business
We launched the second generation of battery-operated equipment in November at an event in Örebro, Sweden. It created strong interest from our customers and we have started to see orders coming in. Our customers are ready for a major technology shift towards more automation, digitalization and battery power. While the complete transition will take time, it is exciting to already now see the positive customer reactions. During the quarter, we acquired a minority position in ASI Mining. The capabilities of ASI are highly complementary to our existing portfolio of digital solutions and we will further strengthen our automation and digital offerings.
Acquisitions strengthen our positions
Our target is to grow at least 8% per year on average over a business cycle. While we grew well beyond that in Q4 and in 2018, we believe we continuously need to make acquisitions to secure long-term growth as well as access to new technologies, markets and geographies. In addition to the ASI acquisition, we agreed to acquire Fordia, New Concept Mining and Sautec. This will strengthen our position in exploration, rock reinforcement and service, and add some SEK 1.2 billion in annual revenues. We welcome our new colleagues to the Epiroc family. Noteworthy also is that we have signed a cooperation agreement with leading communications technology provider Ericsson to jointly help mining companies achieve optimal wireless connectivity in their operations through 5G technologies.
We have built a solid base for Epiroc during 2018 and our target is set on further value creation. Looking into 2019, we will continue to focus on improving our customer offerings, our efficiency, agility and resilience. These are, and will continue to be, the strengths of Epiroc.
President and CEO
A presentation and teleconference will be held today at 15.00 CET. Information is available at epirocgroup.com/en/investors.