July 18, 2019
The second quarter 2019 continued with positive deve-lopment for revenues and profit. Revenues increased 8% to an all-time high at SEK 10,626 million with an organic growth of 3%. The operating profit reached a record of SEK 2,263 million, up 25% compared to the previous year. The operating margin was 21.3% and excluding change in provision for long-term incentive programs, the operating margin was 21.7%. The organic growth and our efficiency actions had positive effects on our operating profit and margin, and our flow-through improved. We also continue to have tailwind from currency. Operating cash flow improved both compared to the previous quarter and year-on-year.
Demand expected to remain at a good level
The activity and production in the mining industry continued to be robust at a high level and our customers are investing in new equipment, even if they continue to be cautious on larger investments. The demand from the infrastructure industry was also healthy.
Orders received were record high at SEK 10,553 million, supported by acquisitions and currency. Organic order intake declined 4% compared to the strong Q2 2018. As expected, the order volumes for Epiroc’s equipment remained at a similar level as in the last three quarters, but did not reach the high level of Q2 2018. The aftermarket business continued to be strong, reflecting the activity level in the market, both in mining and infrastructure. The service business had an organic order growth of 7% and Tools & Attachments had a solid order intake.
Going forward, we do not see any clear signs that the current market situation will change. Hence, we reiterate our view that the demand will remain at the current level in the near term, however noting that Q3 in general is slightly weaker than Q2.
Actions to improve performance
We are saddened by a tragic work-related fatal accident in India. Safety is always a priority and the injury frequency rate is decreasing. To further improve, we have launched a global safety awareness initiative
In Tools & Attachments, we continued to see positive effects from our efficiency actions. In line with our stated ambition to continuously prune our product portfolio and exit non-core areas, we have signed an agreement to divest our geotechnical consumables product line. Our supply-chain program for parts and consumables is progressing according to plan with gradual improvement of availability, transport costs and inventory levels. In the quarter, we decided to invest in a new heat treatment plant for rock drills in Örebro, Sweden, to ensure that we continue to improve rock drill quality and performance. The plant will also increase capacity and reduce costs.
Leadership in automation andbattery-electric vehicles
We have a market-leading offering in automation, connectivity and battery-electric vehicles and the customer interest in, and demand for these solutions is growing quickly. In the quarter, we launched 6th Sense. This is our new offering of solutions to enable customers to optimize processes by connecting machines, systems and people using automation, information management and system integration, and to achieve higher production at lower operating costs.
Currently we have more than 2,500 connected machines, a number that is increasing rapidly. For example, for production drill rigs, the number of connected machines have doubled in the last year. We also see that connectivity is an enabler for increased utilization. In underground drilling more than 550 of our drill rigs are equipped for complete automation of the drilling process. In surface drilling, we have the largest installed base of autonomous rotary drill rigs, and the world’s first fully autonomous SmartROC D65 down-the-hole drill rig is now operating in Canada. Also, the interest in our next generation under-ground battery-electric vehicles continues to be strong and we received more orders for these machines in the quarter.
On June 18, we celebrated our 1-year anniversary as a listed company. We recently concluded our first employee survey, which showed that our employees are engaged and view Epiroc as a great place to work. I am proud of the drive and commitment of our organization as we continue to strengthen our customer offerings and im-prove our efficiency, agility and resilience.
President and CEO
A presentation and teleconference will be held today at 14.00 CEST. Information is available at epirocgroup.com/en/investors.