April 30, 2019 07:30 CEST
Strong growth in revenues and profit
2019 begins with another solid quarter for Epiroc. Revenues increased by 19% to SEK 9,785 million with an organic growth of 14%. Our operating profit increased by 27% to SEK 1,930 million.The operating margin was 19.7% and excluding change in provision for LTI programs the operating margin was 20.3%. More favorable exchange rates had a positive effect on the margin.
Our service business continues to grow healthily. This has a positive impact on our overall profit and will contribute to our resilience going forward. Equipment revenues increased versus last year, but fell sequentially compared to the very strong Q4, which had a negative effect on our cost efficiency in the quarter. In the Tools & Attachments segment, we are pleased to see that our efficiency actions had a positive effect on the operating profit and margin. Working capital increased in the quarter, and continues to be a focus area for improvement. The operating cash flow was lower than in the previous quarter as a result.
Demand expected to remain at a good level
The customer demand in the first quarter 2019 was largely in line with our expectations, with equipment orders at similar levels as in the second half of 2018. Orders received were SEK 10,063 million, somewhat higher compared to Q4 2018 but an organic decline of 5% compared to a strong Q1 2018. The majority of mining equipment orders are still for expansion in or close to existing mines rather than for replacement. The aftermarket business remained strong, reflecting the solid activity in the market, both in mining and in infrastructure.
While our customers continue to be active and relatively confident about the future, and the mineral prices are at healthy levels, there are still uncertainties related to the economic development. We see that our customers primarily invest in lower risk projects with focus on increased productivity and efficiency. We do not see any clear indications that the current market situation will change and expect that the demand will remain at the current level in the near term.
Business development and efficiency actions
We have completed the earlier announced acquisitions of Fordia and New Concept Mining. This strengthens our position in exploration and rock reinforcement and adds some SEK 1.2 billion in annual revenues. At the same time, we are carrying out a number of efficiency actions. Our supply-chain program is progressing according to plan, and changes are being rolled out in selected geographies. Short term, the program has some negative effects on inventory and cost efficiency, but it is necessary to improve long-term efficiency. In Tools & Attachments, we have also pruned the product portfolio and we see some positive effects of our efficiency actions.
Innovations, automation, digitalization and battery power
We are pleased to see that we received several inquiries and orders for automation and battery solutions. We received a large order for underground battery equipment from Canada and orders were booked for Mobilaris Mining Intelligence, a decision support solution for mine efficiency and safety. We were present at the Bauma exhibition in early April and presented a number of innovations, including My Epiroc, a digital tool to help our customers to become more efficient in managing their fleet, and the new generation SmartROC D65, an automation ready surface drill rig.
In 2018 we put a lot of effort into the split and listing of Epiroc. In 2019 we will focus on improving and developing the business further. Besides the continued emphasis on innovation and new product development, a key focus will be on improving efficiency, agility and resilience throughout the company.
President and CEO
A presentation and teleconference will be held today at 09.00 am CEST. Information is available at epirocgroup.com/en/investors.